Housing Bubble

Housing Market Index shows builder confidence still high

July 17, 2003

Builder confidence in the market for single-family homes remained solid, with the outlook for the remainder of the year particularly high, the National Association of Home Builders’ Housing (NAHB) reported today. NAHB’s Housing Market Index (HMI), a key monthly measure of builder confidence, gained two points to 64 in July and a component index gauging sales expectations for the next six months rose three points to a reading of 73 - its highest level in over two years.

"Builders remain confident as favorably low interest rates on home mortgages and solid price performance continue to stimulate home buying," said NAHB President Kent Conine, a home and apartment builder from Dallas. "And builder expectations for home sales through the remainder of the year are high throughout the country."

"The survey reflects builder sentiment during the month of June when the lowest interest rates in nearly 50 years continued to stimulate both home buying and mortgage refinancing. Since then there has been a bump in rates, but they remain very attractive to home buyers," added NAHB Chief Economist David Seiders. "A bigger concern among builders in several regions is their ability to meet demand because land availability has been reduced due to regulatory constraints and the high cost of land in their areas."

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor." They are also asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for responses to each component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.

Each of the component indexes recorded continued to gain in July. The index gauging current single-family home sales rose two points to 69, the index gauging traffic of prospective buyers rose three points to 50, and sales expectations topped 73.

"Builders are as optimistic now as they were last December and January. They’ve experienced several solid months of a fundamentally healthy new-home market. NAHB forecasts that 2003 sales will exceed last year’s record-breaking total, and builders apparently share that view," Seiders said.

Source: National Association of Home Builders