NAHB Housing Market Index rises as builders retain confidence

The National Association of Home Builders' Housing Market Index rose one point to 61 compared to the previous month, according to a July 16 announcement from NAHB.

The index has held within two points of a favorable 60 reading since the beginning of this year. The latest increase indicates that builders generally see positive conditions in the market for new single-family homes.

"Low interest rates and the solid investment potential of homeownership are proving to be powerful incentives for new-home buyers, and builders are seeing solid demand for homes in most markets," said Gary Garczynski, NAHB president and a builder/developer from Woodbridge, Va. "Emphasizing the market's stability, the component of the HMI that measures builder confidence in current sales hasn't budged from a very good 65 reading for the last five months."

Garczynski added, however, that builders across much of the country continue to be concerned about shortages of lots available for development particularly in the Northeast, South and West. "Housing affordability suffers when demand exceeds the number of homes that can be built," he said.

The housing market index 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 also are 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 more than 50 indicates that more builders view sales conditions as good than poor.

At 61, July's index was up a single point from June. The component index gauging current sales was unchanged at 65, where it has been since March of this year, while the index gauging sales expectations for the next six months rose one point, to 69. Registering the most movement this month, the index gauging traffic of prospective buyers rose four points to 48.

"The single-family housing market should continue providing good support to the economy this year, particularly when the impacts of home price appreciation on household wealth and consumer spending are considered," said NAHB Chief Economist David Seiders. He said that NAHB forecasts indicate new-home sales for 2002 should reach 934,000 units, up nearly 3 percent from last year's record pace.