The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) was recently released for the month of July. Builder Sentiment fell one point to 59, from June’s 60, based on the 304 homebuilders that responded for July.
NAHB Chairman Ed Brady offers an explanation for the slight decline, the organization is “still hearing reports from [their] members of scattered softness on some markets, due largely to regulatory constraints and shortages of lots and labor” July 18, 2016.
The NAHB/Wells Fargo Housing Market Index is based on a monthly survey of homebuilders that “gauges builder perceptions of current single-family home sales and sales expectations for the next six months…the survey also asks builders to rate traffic prospective buyers” July 18, 2016. The result of the survey indicates builder’s perception of the market. Scores over 50 indicate conditions are being viewed as more good than poor.
It is important to note changes in the HMI are a function of many components and both short and long term trends must be evaluated. For example, during the month of July builder perception of current sales as well as traffic of perspective buyers each fell one point, and builder perception of sales over the next six months fell three points. However, the three month averages for regional HMI scores has remained steady.
Industry experts believe the housing market remains on course for recovery despite the slip in HMI, and assert that these trends demonstrate a housing market that is gradually but steadily growing. NAHB’s chief economist agrees, and is confident the housing market will continue to improve. “Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses” July 18, 2016.