April 15th, 2014
Confidence among homebuilders increased in April, which is a good sign the housing inventory will increase in the coming months. The National Association of Home Builders/Wells Fargo Housing Market Index for April recorded a reading of 47, up from March's figure of 46.
Index on the rise
The index is used in order to determine the level of activity for newly built single-family homes. A reading over 50 indicates builders feel good about the current building conditions. NAHB Chairman Kevin Kelly said although the index has been a little low over the past few months, the industry should see continued growth once the homebuying season kicks off.
"Builder confidence has been in a holding pattern the past three months," Kelly said. "Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead."
The index is made of three components each of which has its own index in order to gauge housing activity for the country. The component that looks at current sales remained the same from March at 51, while the section analyzing future sales increased four points to 57. Traffic of prospective buyers also remained unchanged from March at 32.
NAHB Chief Economist David Crowe said job growth and home prices are the main reasons the index rose over the past month.
"Job growth is proceeding at a solid pace, mortgage interest rates remain historically low and home prices are affordable," Crowe said. "While these factors point to a gradual improvement in housing demand, headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and the fact that builders in many markets are facing a limited availability of lots and labor."
Regional indexes down
Although the overall index for homebuilders increased during the past month, the readings for the four regions NAHB tracks recorded declines. The three-month average for the West fell to 51 from 60, while the Midwest index declined four points to 49. The Northeast and South fell two points to indexes of 33 and 47, respectively.
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