Photo: James Bombales
The US housing market is cautiously creeping back to life, as evidenced by the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which increased seven points to 37 this month after recording the largest-ever monthly decline in April.
The HMI is seasonally adjusted and measures builder confidence in the market for newly-built single-family homes. It’s based on a monthly survey of NAHB members and ranges from 0 to 100. A score higher than 50 suggests “good” market conditions, while anything under the threshold is considered “poor.”
“The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said NAHB Chairman Dean Mon.
“At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.”
Builder confidence in current sales conditions ticked up six points to 42, but the outlook for the next six months was even rosier, increasing 10 points to a score of 46. Meantime, the HMI that gauges prospective buyer traffic jumped eight points to 21.
The West, which stretches from Colorado to California, observed the highest gain — bumping up 12 points to an HMI of 44. The South saw an increase of eight points to 42 and the Midwest posted a seven-point boost to 32. The tally for the Northeast, the region that has been hit hardest by the COVID-19 pandemic, fell two points to 17.
NAHB Chief Economist Robert Dietz says the combination of low interest rates, loosening restrictions, rising mortgage applications and increasing buyer traffic “suggest[s] a housing rebound.” However, he was quick to point out that high unemployment rates and supply-side challenges, such as securing financing or material shortages, are “near-term limiting factors” that could hamper the market’s recovery.