Builder confidence 'quite upbeat'

Indicating that single-family builders perceive conditions in the new-homes marketplace to be nearly as favorable as they were during last year’s record-breaking sales and production activity, the National Association of Home Builders’ monthly gauge of builder confidence for January is down just slightly from December and poised to rise again on the latest downshift in mortgage rates.

NAHB’s Housing Market Index, released today at the International Builders’ Show in Las Vegas, fell two points to 68 in January – still well ahead of its 64 reading at the start of 2003.

“Coming off the best year in history for single-family home sales and production, builders are set for another very busy year in 2004,” said NAHB President Kent Conine, a home and apartment builder from Dallas. “There’s plenty of momentum in this marketplace.”

“In all, the outlook is quite upbeat,” agreed NAHB Chief Economist David Seiders. “Keep in mind that the January HMI survey was taken before the latest downshift in long-term mortgage rates, so there is good upside potential for this measure heading forward.” The average rate on 30-year mortgages fell from an already attractive 5.85 percent in early January to an even more favorable 5.66 percent last week.

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 “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. (The HMI has not been gauged below 50 since November of 2001.)

Each of the HMI’s component indexes slipped in January from exceptionally strong levels in the previous month. The index gauging current sales of new single-family homes fell three points to 74, while the indexes gauging sales expectations for the next six months and traffic of prospective buyers each fell two points, to 75 and 50, respectively.

The National Association of Home Builders is a Washington-based trade association representing more than 215,000 members involved in residential and light commercial construction.