The Housing Chronicles Blog: Better traffic in February improves builder sentiments

Tuesday, February 19, 2008

Better traffic in February improves builder sentiments

According to the monthly NAHB/Wells Fargo Housing Market Index, things are looking up for the nation's builders, albeit only very slightly. The main reason for the improved outlook is increasing traffic at new home communities, which typically rise sharply each year following the Super Bowl. Still, many of those traipsing through model homes may be looking for decorating ideas rather than seriously looking at new homes, but the trend certainly bears watching:

Builder confidence in the market for new single-family homes edged marginally higher in February as traffic of prospective buyers through model homes improved considerably, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI rose a single point to 20 this month, still close to its recent historic low reading of 18 (the series began in January of 1985).

“While builders remain very cautious about the outlook for new-home sales given today’s economic environment, the fact that more consumers appear to be checking out their options is a good sign,” said Sandy Dunn, a home builder from Point Pleasant, W.Va. and the newly elected 2008 president of the National Association of Home Builders (NAHB)...


“Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase given improving affordability factors and the large selection of units on the market,” said NAHB Chief Economist David Seiders. “That said, builders know there’s a difference between people looking and people buying, and their current outlook remains quite subdued. Additional stimulative measures on the legislative and policy side are definitely needed to bolster consumer confidence and help bring about a housing and economic recovery.”...

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor...


Three out of four regions posted HMI gains for the month, including a three-point gain to 24 in the Northeast, a two-point gain to 24 in the South and a 2-point gain to 15 in the West. The Midwest registered no change for the month at 16.


Even with the uptick, however, the overall sentiment remains the lowest it's been since January of 1991 (historical table below):


The NAHB/Wells Fargo Housing Market Index (Historical Data)

Housing Market Index (Historical data)
(Seasonally Adjusted)

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

1985

50

58

54

49

51

54

58

58

56

59

58

57

1986

57

55

57

62

64

65

59

55

57

64

59

64

1987

63

60

60

59

55

56

55

54

52

50

56

51

1988

53

51

51

52

54

49

54

56

53

49

58

60

1989

54

53

48

44

44

45

46

50

51

48

46

43

1990

42

44

40

39

36

36

32

30

31

28

25

22

1991

20

27

36

41

40

42

41

36

37

37

37

35

1992

44

49

46

46

47

45

46

49

48

50

54

56

1993

55

52

53

52

51

53

57

60

62

66

71

71

1994

70

64

61

61

59

57

53

53

50

49

50

43

1995

40

42

40

42

43

45

49

50

51

55

52

53

1996

54

49

59

60

61

59

58

56

55

56

54

55

1997

54

52

57

56

55

56

55

58

59

59

58

60

1998

60

65

66

67

67

70

71

72

71

73

77

78

1999

75

71

71

71

75

77

75

72

72

69

70

70

2000

69

68

64

63

63

58

59

60

60

62

63

57

2001

52

58

60

59

58

59

57

59

55

46

48

55

2002

58

58

62

61

61

61

61

55

63

61

62

63

2003 62 63 56 55 60 63

65

67

67

69

68

69

2004 68 66 66 69 69 68

67

70

67

69

70

71

2005 70 69 70 67 70

72

70

67

65

68

61

57

2006

57

56

54

51

46

42

39

33

30

31

33

33

2007

35

39

36

33

30

28

24

22

20

19

19

18

2008

19

20

Source: Builders' Economic Council (BEC) Monthly Surveys

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