Mar 15 2005
A modest increase in home mortgage rates over the past month hasn’t dampened builder enthusiasm in the market for new single-family homes, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.
The confidence gauge remained unchanged in March from an upwardly revised reading of 69 in February. “Robust buyer demand continues to sustain the new-home market, with no sign of letting up in the near future,” said Dave Wilson, NAHB president and a custom home builder from Ketchum, Idaho. “Many builders are solidly optimistic about their prospects in coming months.” “Builders have good reason for confidence even as interest rates gravitate upward,” agreed NAHB Chief Economist David Seiders. “Demand for new homes still exceeds supply in many markets, while financing conditions remain quite favorable and jobs and incomes are on the rise.”
The average interest rate on long-term mortgages rose about 25 basis points between the February and March HMI survey periods. The NAHB/Wells Fargo Housing Market Index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Each month, builders report current sales of single-family homes and prospects for sales in the next six months as either “good,” “fair” or “poor.” They also 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 sales conditions as good than poor. The HMI remained unchanged from February’s upwardly revised 69 reading in March. Both the current-sales and future sales component indexes remained on par with their revised February readings (of 76 and 79, respectively), while the component gauging traffic of prospective buyers edged up a single point to 51.
“The fact that the HMI has remained at such a high level and within the same two-point range throughout the past six months is a reflection of the ongoing stability and strength of the nation’s housing market,” said Seiders. On a regional basis, the index gauging builder confidence in the Northeast rose six points to 74 in March, while the index for the West rose four points to 83. Builders in the South posted a one-point HMI decline to 73, while builders in the Midwest – where the job market remains relatively weak – posted a two-point decline to 53.