The National Association of Home Builders (NAHB) and Wells Fargo released the monthly Housing Market Index for July, and the overall numbers are up 6 points. This is the highest total rating conveyed in the Housing Market Index since January of 2006. Market conditions remain on the upswing for builders. Many market areas or metros still have lower levels of available existing housing inventory; therefore, well-qualified buyers are flocking to new construction.
The Housing Market Index score is calculated by measuring three areas of growth by way of surveying homebuilders. All three of these areas showed gains in July. Potential buyer traffic climbed 5 points, while the assessment of builders’ sales expectations for the next 6 months rose 7 points resulting in the highest scores since late 2005 for buyer traffic and sales expectations. Meanwhile, the assessment of builders’ perception of the current sales conditions increased 5 points, also hitting the highest level since early 2006.
NAHB Chief Economist David Crowe cited low existing home inventory as one of the factors driving buyers toward new construction. He also noted an enhancement in the infrastructure that supplies home building, and stated that some costs for materials have stabilized or decreased as well. In addition to the positive gains in the three areas measured in the index, July’s Housing Market Index also indicated gains in the 3-month moving averages for all four regions of the U.S:
- The South rose 5 points
- The Northeast gained 4 points
- The Midwest jumped 8 points
- The West increased 3 points
Given those numbers, the outlook for recovery in the housing market continues to be bright. However, NAHB Chairman Rick Judson, a homebuilder in North Carolina, says there are still areas that builders are watching somewhat cautiously. He stated in this month’s Housing Market Index, “This positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.”
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