Demand for New Homes Lifts Builders' Confidence to 7-Year High

Demand for New Homes Lifts Builders' Confidence to 7-Year HighIt was bound to happen in a rebounding housing market with surging prices and unmet demand for new homes: the national index that measures confidence among builders hit a milestone at 52 this month.
Any reading over 50 indicates that more builders view sales conditions as good, rather than poor, under the measure from the National Association of Home Builders.
The index has not been over 50 since April 2006.
“Surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C. “With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes.”
The eight-point jump compared to May’s reading was the biggest one-month gain since August and September of 2002, when the index recorded a similar increase of eight points.
The jump in confidence is on par with the NAHB’s forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark, said NAHB Chief Economist David Crowe.
Based on a monthly survey that the NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index 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 from 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.

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