Increasing Builder Confidence Predicting Growth in the Market for New Homes

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The confidence in the home building industry is increasing and this is a clear prediction of improvement in the market for new housing units in the coming months and years. The current increase is the most significant over the past months. It is coupled with increase in the buyer traffic perceptions as well.

The Housing Market Index (HMI) produced by the National Association of Home Builders in association with Wells Fargo increased to 49 in June 2014 from 45 in May. The monthly increase of 4 points is the highest over the past months during which the index was fluctuating around the mid 40’s. The increasing confidence of builders is expected to result in higher housing construction and increase in the inventory, which is currently at fairly low levels. With greater inventory, the prospects of buyers are expected to improve as well.

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The index has moved to the important threshold of 50 points for the first time in months. The 50-point threshold indicates that more builders are defining the industry conditions as good rather than poor. The question is whether this threshold will be reached in the coming months. The industry is facing some internal challenges such as the low supply of labor in many areas. Additionally, the sales of new homes fell by 14.3% from April to May 2014.

Despite the negative factors, the confidence of builders is likely to surge in the short term with the Housing Market Index expected to reach 50 points. One of the major reasons for this is the increase in the sales conditions index and in the future prospects index by 6 and 3 points respectively. The buyer traffic perceptions index rose by 3 points as well.

The improvement in the confidence of home builders is matched by smaller improvement in the confidence of home buyers. Households are still waiting for clear indications of full recovery of the economy.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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