Finance Globe

U.S. financial and economic topics from several finance writers.
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Builder Confidence Rises to Highest Point in Over a Year

Builder confidence in August rose one point to its highest point in over a year, according to the latest reading of the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

After a two point gain in July, the HMI reached 18 this month - its highest point since June 2008. NAHB Chairman Joe Robson, a home builder from Tulsa, Oklahoma, said that the success of the first-time home buyer credit has buoyed home builder expectations. Increased buying activity is anticipated through the first-time home buyer credit program's November 30 expiration date.

“The question is what happens after that – whether there will be enough momentum to keep us moving toward a recovery, particularly in light of significant headwinds such as the severe credit crunch for housing production loans and inappropriate appraisal practices that are scuttling a quarter of all new-home sales. Unless Congress and the Administration focus their attention on housing right now, this improvement may well be short-lived,” Robson said.

“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 and that a turning point is near at hand. Meaningful action by Congress could ensure that this upward momentum continues and that housing can help push the economy back onto solid ground.”

NAHB is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers. NAHB is also urging Congress to help eliminate the credit crunch, correct faulty appraisal practices and expand Net Operating Loss tax provisions that can help avoid more layoffs. Each of these actions are expected to generate thousands of new jobs and provide a much-needed boost to economic recovery.

NAHB has been conducting the HMI survey for more than 20 years to gauge builder perceptions of current single-family home sales and sales expectations for the next six months as "good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Regionally, all but the South recorded HMI gains in August. The Northeast posted an 8-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.

Two out of three of the HMI’s component indexes recorded substantial gains in August. The biggest boost, of 4 points, was registered by the index gauging sales expectations in the next six months, which rose to 30 this month. Meanwhile, the index gauging traffic of prospective buyers gained three points to 16 and the index gauging current sales conditions held unchanged at 16.

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Thursday, 28 January 2021

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