Publication Date:
Mon, 2012-04-16 11:42
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NAHB economists speculate that low conversion of buyer interest into closed sales contracts led to lower builder confidence in April.
Data released by NAHB on Monday shows the NAHB/Wells Fargo Housing Market Index tracked nearly 10 points higher in April 2012 than the same time last year, continuing the overall positive swing in builder confidence over the last 12 months. Month-to-month, the index dropped three points from 28 in March to 25 in April, the first time it has declined since September 2011.
The monthly index rating is determined by evaluating builders’ responses to a survey on confidence in current and future single-family home sales; the NAHB/Wells Fargo HMI also inquires about traffic of prospective buyers. Scores from each component are used to calculate the seasonally adjusted index, where any number over 50 indicates that more builders view conditions as good than poor.
Each of the index’s components registered declines in April. The component gauging current sales conditions and the component gauging sales expectations in the next six months each fell three points, to 26 and 32, respectively, while the component gauging traffic of prospective buyers fell four points to 18.
NAHB economists suspect the drop-off in confidence is due to low conversion of buyer interest into actual closed sales. “Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” noted Barry Rutenberg, NAHB chairman and a home builder from Gainesville, Fla.
Regionally, the HMI results were somewhat mixed in April, with the Northeast posting a four-point gain to 29 (its highest level since May of 2010), the West posting no change at 32, the South posting a three-point decline to 24 and the Midwest posting an eight-point decline to 23.
Year-over-year, each region is up at least nine points from April 2011. The West has seen the greatest increase in builder confidence, moving from an 18 last April to this month’s 32.
To read the rest of NAHB’s report, click here [1].
