Homebuilder Confidence Returns To Pre-Recession Levels

NAHB HMI index 2010-2012

New construction buyers in Sacramento , look out. The nation’s home builders are predicting a strong 2012 for new home sales. It may mean higher home prices as the spring buying season approaches.

It’s not time to bring out the balloons and good china yet, as the housing market’s health has a long way to go. To put this in perspective, the current pace is less than half the rate in which those homes went up during the 1990s. Hopefully, this is emblematic of a gradual and sustained growth (and recovery).

Many analysts agree it could be years before homebuilders are fully recovered from the damage caused by the housing bust. But, builders are starting to see some signs of progress.

For the sixth straight month, the National Association of Homebuilders reports that homebuilder confidence is on the rise. The Housing Market Index climbed four points to 29 in February, the index’s highest reading since May 2007.

The Housing Market Index is now up 8 points in 8 weeks. The last time that happened was June 2003, a month during which the U.S. economy was regaining its footing, much like this month. It’s noteworthy that June 2003 marked the start of a 4-year bull run in the stock market that took equities up 54%.

The NAHB’s Housing Market Index itself is actually a composite reading. It’s the end-result of three separate surveys sent to home builders monthly.

The association’s questions are basic :

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

In February, builders reported marked improvement across all three areas. Builders report that current home sales climbed 5 points; that sales expectations for the next 6 months climbed 5 points; and that buyer foot traffic climbed 1 point.

Most notable of all of the statistics, though, is that the nation’s home builders report that there are now twice as many buyers setting foot inside model units as compared to just 6 months ago.

This data is supported by the monthly New Home Sales report which shows rising sales and a shrinking new home inventory.

Because of this, today’s new home buyers throughout California  should expect fewer concessions from builders at the time of contract including fewer price brakes on a home and fewer free upgrades. Builders are optimistic for the future and, therefore, may be less willing to “make a deal”.

This spring may mark a good time of year to buy a new home. Rates are still low (went up today a bit) and should stay relatively low for the coming months.

If you would like a free credit analysis or loan pre-qualification don’t hesitate to contact me.

1 thought on “Homebuilder Confidence Returns To Pre-Recession Levels

  1. Hi There Dan,
    Very interesting, This federal budget is all about confidence!  Confidence in the economy springing back next year, confidence in consumers deciding to spend their federal income tax cuts, confidence in the banks loosening the purse strings, confidence in small business owners to keep staff and now have employee layoffs, confidence in the world economies to start importing Canada’s natural resources again, but most importantly, confidence by the American population to start spending again.

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