Existing Home Shortage Boosts New Home Sales, Builder Confidence

The index that measures the confidence of new home builders in the market for their product inched slightly higher again in April. The National Association of Home Builders (NAHB) says the NAHB/Wells Fargo Housing Market Index (HMI) rose 1 point to 45 as sales continue to be supported by the lack of pre-owned homes available for sale. NAHB’s chief economist Robert Dietz said, “ Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10 percent . More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023.” “While AD&C [acquisitions, development, and construction] loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse. Builders note that additional declines in mortgage rates, to below 6 percent, will price in further demand for housing. “Nonetheless, the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment ,” Dietz said. The HMI is based on a survey conducted each month that asks new home builders about their perceptions of current single-family home sales and sales expectations for the next six months, ranking conditions as “good,” “fair” or “poor.” The survey also asks builders to rate the 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 conditions as good than poor.