A reported rise in the traffic of prospective home buyers at model homes has kept builder confidence steady, the National Association of Home Builders reported today. The association’s Housing Market Index, which gauges monthly builder sentiment, matched April’s reading of 69.
Scores above 50 indicate good conditions in the housing market, while scores below 50 indicate poor conditions. The HMI is derived from a monthly survey of builders that NAHB has been conducting for the last 19 years. Home builders are asked to rate current and expected sales of single-family homes 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.”
“Demand remains strong and as mortgage interest rates begin to edge up, buyers continue to move into the marketplace at a healthy clip,” said NAHB President Bobby Rayburn, a home and apartment builder from Jackson, Miss. “Robust job growth, solid home-price appreciation and favorable interest rates that remain low and attractive by historical standards point to an upbeat outlook for housing.”
The indicator measuring buyer traffic soared to a 13-month high in May, offsetting slight declines in the two other components that comprise the HMI index. The index gauging traffic of prospective buyers jumped seven points, from 48 in April to 55 in May, indicating more visitors to model homes over the last month. Meanwhile, the index gauging current sales of new single-family homes fell three points to 74, while the index gauging sales expectations for the next six months declined one point to 75.
“When the index of prospective buyers jumps above 50, it usually indicates a solid housing market and shows that more families are looking for new homes,” said NAHB Chief Economist David Seiders. “With job growth and household income accelerating, this will provide a stronger foundation for economic activity during the second half of this year and in 2005. And that’s good news for housing, despite moderate increases in mortgage rates from recent lows.”
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