Home builder confidence inched up in August, reflecting a hesitantly improved outlook on residential new construction not seen for more than ayear, the National Association of Home Builders reported Monday afternoon.
The NAHB/Wells Fargo Housing Market Index (HMI) rose to 18, one index point higher than July's level and higher than it's been since June 2008. An HMIof 18 is still very low, considering that any reading lower than 50 means that more home builders are pessimistic than encouraged.
What's more, although it's on an upward trajectory--gaining 125% since its lowest point in history in January--the confidence index will have to withstand at least a few more gusts of stiff headwinds if it is going to sustain its forward momentum during the latter half of 2009.
"We expect deterioration in the index in the second half of the year as rising supply meets waning demand," wrote David Goldberg, home building and building products analyst at UBS Investment Bank.
NAHB leadership chose to accentuate the positive, but used the current level of builder morale to try to sway Capitol Hill toward extending or enhancing tax credits for home buyers.
"Home builder expectations have been buoyed by the success of the first-time home buyer tax credit and its anticipated boost to buying activity leading up to the Nov. 30 expiration date," said NAHB chairman Joe Robson, a homebuilder from Tulsa, Okla. "The question is what happens after that?whether there will be enough momentum to keep us moving toward a recovery."
The index gauging current sales conditions rose one point to 18, while the index gauging traffic of prospective buyers rose two points to 16. The index gauging sales expectations for the next six months jumped 15% sequentially to 30. Any reading below 50 indicates negativity; above 50 is considered positive.
"One very positive aspect of today's report is the big gain registered in the component gauging home builders' expectations for the next six months,"noted NAHB chief economist David Crowe. "This reflects anticipated sales stemming from the tax credit as well as recent signs that an economic recovery has begun. There is definitely a sense of hope among builders that the worst of the downturn is over."
That point gets corroboration from another monthly survey of home building executives, fielded by John Burns Real Estate Consulting.
"While conditions vary by region and location, we are almost at a point where the majority of our respondents indicate that the housing market has stabilized," said Jody Kahn, vice president of Irvine, Calif.-based John Burns Real Estate Consulting.
The JBREC survey reports that new-home price stability has begun showing a pulse?even as neighborhood "store" traffic remains challenged; builder shave strung a series of nearly seven sequential monthly improvements together in almost every region. Also, builders report that they've been able to cut direct square footage building costs by 11% to 15% from their peak in 2006.
Per the NAHB HMI, regionally, all but the South recorded HMI gains in August. The Northeast posted an eight-point gain to 24, the Midwest posted a two-point gain to 16, the West posted a three-point gain to 17, and the South posted a one-point decline to 18.