Builders are a little more confident in the market for new single-family homes this month but remain far short of positive, according to the National Association of Home Builders/Wells Fargo Housing Market Index for September.
The HMI rose one point to 19, its third consecutive monthly gain and highest level since May, 2008. It matched the consensus Wall St. estimate. Still, any number lower than 50 indicates a negative view of the market.
"Builders are seeing some improvement in buyer demand as a result of the first-time home buyer tax credit, and low mortgage rates and strong housing affordability have also helped to revive some optimism,² said Joe Robson, the Tulsa, Okla. home builder who is chairman of NAHB. "However, the window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit before it expires at the end of November, and builders are concerned about what will keep the market moving once the credit is gone."
Two of the HMI's component indexes recorded gains in September, with the index gauging current sales conditions up two points to 18 and the index gauging traffic of prospective buyers up a point to 17. The index gauging sales expectations for the next six months declined one point to 29.
Regionally, the gains were led by the Midwest, which rose three points to 19. The Northeast was up two points to 24, the South was up one point to 19 and the West was also up a point, to 18.
"Today¹s report indicates that builders are starting to see some glimmers of light at the end of the tunnel in terms of improving sales activity," said David Crowe, NAHB chief economist."However, the fact that the HMI component gauging sales expectations for the next six months slipped backward this month is a sign of their awareness that this is a very fragile recovery period and several major hurdles remain that could stifle the positive momentum."
Among the hurdles Crowe specified were the November expiration of the first-time home buyer tax credit of $8,000, tight-to-non-existant credit of housing production and continuing problems with home appraisals, which have been dragged down by a combination of foreclosures, short-sales and appraiser unfamiliarity with local markets. "These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth," said Crowe.
The HMI is based on an index of 100, where any number over 50 indicates positive builder perceptions of the marketplace, under 50 negative.