June 17th, 2015
Homebuilder sentiment provides a gauge of how well the housing market is performing with regard to sales, and the latest housing market index from the National Association of Home Builders (NAHB) shows residential construction professionals have a positive outlook.
David Crowe, NAHB chief economist, said the HMI reached the highest readings since 2005 for builder perceptions of future and current sales. The category for buyer traffic also increased, and the Midwest was the only region to experience a drop in its HMI. In his opinion, this bodes well for the pace of new-home sales over the next few months. Tom Woods, NAHB chairman, shared this optimism.
“Builders are reporting more serious and committed buyers at their job sites, and this is reflected in recent government data showing that new-home sales and single-family construction are gaining momentum,” Woods said.
The April new residential sales report from the U.S. Department of Housing and Urban Development (HUD) and Department of Commerce showed a 6.8 percent gain month over month and a 26.1 percent advance from April 2014. This data supports positive builder sentiment.
On-the-fence buyers entering the market
When the U.S. Census Bureau published the joint release from HUD and the Commerce Department, the NAHB weighed in on the progress. In response to that report, both Woods and Crowe voiced their expectations that sales would continue to increase, and the former said consumers who were on the fence about buying have started to work toward home purchases.
“Following an unusually low sales report in March, today’s numbers are consistent with other data we’ve seen recently and indicate a continuing, gradual improvement in the housing market,” Crowe said.
With the positive sentiment carrying over a couple of months, it’s no surprise the HMI hit a nine-year high.
Some economists not completely convinced
Though builders look forward to continued gains in home sales, some economists have a more cautious view of current market activity, particularly because housing starts haven’t presented significant improvements, according to The Wall Street Journal. MFR Chief Economist Joshua Shapiro is among this group.
“There remains a big disconnect between what homebuilders are saying and what they are actually doing,” Shapiro told the Journal.
Regardless of whether activity actually matches builder perceptions, the Journal noted the confidence will lead to more spending for building materials and improvements for the job market to provide a much-needed boost to the economy.