Economists talk about the potential for a V shaped recovery from the pandemic
and that is exactly the pattern displayed by the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The HMI, a measure of
builder confidence in the market for newly constructed homes, rose 14 points
this month, completing the upward leg of the V and returning to its
pre-pandemic March reading of 72. The index had plummeted 42 points in April
before staging a three-month comeback.

 

 

Derived from a monthly survey that NAHB has been conducting for 30 years,
the HMI gauges builder perceptions of current single-family home sales and
sales expectations for the next six months as “good,” “fair” or “poor.” The
survey also asks builders to rate traffic of prospective buyers as “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 conditions as good than poor.

All the HMI indices posted gains in July. The HMI index gauging current
sales conditions jumped 16 points to 79, the component measuring sales
expectations in the next six months rose seven points to 75 and the measure
charting traffic of prospective buyers posted a 15-point gain to 58.

NAHB said builders are seeing strong traffic and interest in new
construction as inventory issues persist for existing homes. Builders in the Northeast
and the Midwest are benefiting from the pent-up demand after the spring
lockdowns and low interest rates are further fueling demand.

Still there are challenges. Lumber prices are at two-year highs and builders
are reporting rising costs for other building materials while lot shortages and
skilled labor availability issues persist.

NAHB sees new home demand improving in lower density markets, including
small metro areas, rural markets and large metro exurbs, as people seek out
larger homes and anticipate more flexibility for telework in the years ahead.
“Flight
to the suburbs is real,” it says.

Looking at the monthly average regional scores, the Northeast HMI surged 22
point to 70, the Midwest jumped 18 points
to 68, the South increased 10 points
to 73 and the West increased 14 points to 80.

By Jann Swanson , dated 2020-07-16 10:33:34

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Courtesy of Mortgage News Daily

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