Led By Expectations Of A Strong Fall Season, Homebuilder Confidence Bounces Back

Homebuilder confidence is bouncing back.

One month after an unceremonious dip highlighted by poor sales figures and dim prospects for the future, the National Association of Homebuilder's Housing Market Index rebounded two points to 15 in July.

The monthly Housing Market Index is scored on a 1-100 scale. Readings above 50 indicate favorable conditions for homebuilders and the "new home" market. Readings below 50 indicate unfavorable conditions.

The Housing Market Index has not read higher than 50 in more than 5 years.

As a housing metric, the HMI is actually a composite of three separate surveys, self-reported by builders. The surveys ask about current single-family home sales volume; projected single-family home sales volume; and current buyer foot traffic levels.

In July, the responses read as follows : 

• Current single-family sales : 15 (+2 from June)
• Projected single-family sales : 22 (+7 from June)
• Buyer foot traffic : 12 (Unchanged from June)

The most noteworthy reading is the rapid rise in Projected single-family home sales. Although builders aren't experiencing more foot traffic, they think sales will spike between now and the New Year. 

That could spell bad news for Apex home buyers.

When builders harbor higher expectations for the future, they're less willing to make concessions for upgrades and/or price. Your likelihood of getting "a great deal" as a buyer diminishes.

That's why it's good that mortgage rates are still so low. Low mortgage rates help with home affordability and can offset slight jumps in sale price.

Mortgage rates remain just above their lowest levels of 2011, and of all-time. 

Home Builders Seeing More Sales Today; Fewer Sales Tomorrow

Home builder confidence can't shake its range, according to the National Association of Home Builders. The group's monthly Housing Market Index put May's builder confidence reading at a level of 16.

The Housing Market Index is scored on a scale of 1-100. A reading above 50 suggests favorable conditions for the new home housing market, as reported by home builders. A reading below 50 suggests unfavorable conditions.

May marks the sixth time in 7 months that the HMI posted a 16, the longest such plateau in the index's history.

The HMI has not posted higher than 50 since April 2006.

As an index, the HMI is a composite of three separate surveys sent to home builders each month. The surveys are meant to capture the current and projected single-family home sales volume, in addition to buyer foot traffic levels.

Versus April, there was little change:

• Current single-family sales : 16 (+1 from April)
• Projected single-family sales : 20 (-2 from April)
• Buyer foot traffic : 14 (+1 from April)

Broken down, the Housing Market Index for May shows that home builders are experiencing a boost in sales and foot traffic today, but expect that boost to fade between today and November. For home buyers in Raleigh , this can present an opportunity.

With home builder confidence stagnating, and with a worsening sales expectation for the next 6 months, builders may be more willing to negotiate with you on home prices and/or the costs of upgrades. Builders may also be more willing to make concessions in your sales contract that would otherwise be unavailable to you.

Your real estate agent can help you to identify the negotiable items of your offer.

In addition, today's home buyers can exploit the recent strength of the mortgage market. Surging mortgage bond demand since April has pushed mortgage rates down to their lowest levels of the year. If you can find a home you love, therefore, it can be financed on the (relative) cheap, too.

Conforming mortgage rates in North Carolina fell through 5 consecutive weeks before rising last week.

As Buyer Traffic Grows, Homebuilder Confidence Slips

Homebuilder confidence is falling -- a good sign for buyers of newly-built homes.

According to the National Association of Homebuilders, the Housing Market Index slipped one point to 16 in April. It's the 5th time in 6 months that the index read 16 -- a figure exactly in line with the 1-year average, but still considered "poor". The Housing Market Index reports on a scale of 1-100.

Values of 50 or better representing "favorable conditions". Values below 50 are considered "unfavorable".

It's been 5 years since the Housing Market Index read north of 50.

As an index, the HMI is actually a composite of three separate surveys, the results of which can be as telling as the final, compiled results. The surveys focus on specific aspects about a homebuilder's business, and use the broader responses to gauge overall market "sentiment".

The 3 questions are: 

1. How are market conditions for the sale of new homes today?
2. How are market conditions for the sale of new homes in 6 months?
3. How is prospective buyer foot traffic?

In April, interestingly, home builders felt market conditions were worse across the board, but still cited higher buyer foot traffic. This may be the result of a combination of rising mortgage rates and falling home values. Both tend to be bad for builders, and both tend to spur home buyers into action.

As a home buyer this spring, therefore, use the HMI data to your advantage. When home builders feel less confident on housing, buyers can often exact better concessions and/or upgrades during the negotiation process.

And, so long as mortgage rates continue to rise, that pressure on builders should build.

Home Builders Report Higher Sales Levels In January

Homebuilder confidence in the market for newly-built, single family homes appears stable as the spring buying season gets underway in Cary.

The confidence reading is recorded and reported monthly by the National Association of Homebuilders. For the 4th straight month, the group's Housing Market Index reads 16.

As a market indicator, Housing Market Index has been tracked for more than twenty years and reports on a 1-100 scale. A value of 50 or better indicates "favorable conditions" for home builders.

HMI hasn't read higher than 50 since April 2006.

Broken down, the Housing Market Index is actually a weighted composite of 3 separate surveys measuring current single-family sales; projected single-family sales; and foot traffic of prospective buyers.

February's surveys showed slight improvement as compared to January, overall.

• Single-Family Sales : 17 (+2 from from January)
• Projected Single-Family Sales : 25 (+1 from January)
• Buyer Foot Traffic : 12 (unchanged from January)

It's notable that the current sales levels were higher in February, and that projected sales levels for the next 6 months are higher, too.

For home buyers North Carolina across , this month's Housing Market Index reading may foreshadow tougher negotiations in the months ahead with builders. The likelihood of getting discounts and free upgrades may be diminished as builders see their respective sales levels grow, and as the economy expands.

Coupled with rising mortgage rates, home buyer purchasing power may never be as high as it is today. 

Therefore, if your plans call for buying a newly-built home this year, think about moving up your time frame. Builder confidence appears to have bottomed. As it rises, so should home prices.

Home Builders Slowed By Economy, But Seeing More Foot Traffic

Homebuilder confidence held firm for the second straight month this month, according to the National Association of Home Builders.

The monthly Housing Market Index registered 16 out of a possible 100. January's reading is three points higher than the 2010 low-point, set in September, and in-line with last year's average reading.

According to the NAHB, the market for newly-built, single family homes remains relatively weak "following a below-expectations finish in 2010". Builders expect a better 2011.

The Housing Market Index dates to 1985. It's a composite of surveys which gauge the builders' perceptions of the new home-buying market.

There are 3 surveys and they ask:

1. How would you rate market conditions for sales of new homes today?
2. How would you rate market conditions for sales of new homes 6 months from now?
3. How would you rate the foot traffic of prospective buyers of new homes?

The answers are then collated and weighted, and used to produce the Housing Market Index.

In January, market conditions for current and future sales were deemed to be flat. Foot traffic is seen as increasing. For homebuyers of new homes in Cary , this data may foretell of more bidding wars in the months ahead.

More active buyers means more competition for homes. It may also mean fewer concessions from builders as confidence starts rising.

If you're in the market for a newly-built home, watching the Housing Market Index may be sensible. Each builder is different, of course, but as the overall market sentiment falls, buyers can be more likely to get "a deal". That's not the case once confidence is rising.

The HMI is plateaued. If it resumes rising later this year, expect new homes to get more costly.