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Builders Confidence Hits 7-Year High

Posted by Breckenridge Associates Real Estate on Friday, July 5th, 2013 at 12:26pm.

There are continuing signs that the housing market is on an upward trend towards recovery. In June, builder confidence for new construction of single-family homes hit a milestone. It surged 8 points on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), to 52 points. Readings that are over 50 points, indicates that builders view sales conditions as good versus poor.

Builders’ perceptions on the current single-family home sales for the next six months are marked as “good”, “fair” or “poor.” Builders are also asked to rate the traffic of prospective buyers from “high to very high,” “average” or “low to very low.” With these different components, the scores are then used to calculate the index. Any number over 50 indicates that more builders view the current building conditions as good. In June, all three areas showed gains. Current sales conditions increased eight-points as well, to 56. The index that measures future sales rose to 61-points (highest since March of 2006), and the index that tracks active buyers rose seven-points to 40.

According to the NAHB chairman, Rick Judson, a builder/developer from Charlotte, N.C., “This is the first time the HMI has been above 50 since April of 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases. With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes.”

The eight-point jump is one of the largest gains since August and September of 2002. That is the last time when the HMI recorded a similar increase in points.

The NAHB Chief Economist, David Crowe has stated that, “Builders are experiencing some relief in the headwinds that are holding back a robust recovery. ” With the report of an eight-point increase, it is consistent with the forecast of the housing market recovery.

With the inventory shortage seen in many markets, it is making the new-home construction another profitable area in real estate markets. According to Mark Woodroof, a partner at Better Homes and Gardens Real Estate, “The inventory situation should not have snuck up on us. We were building less than 500,000 homes, which the market calls for 1.5 million a year. The new-home builders will not be able to fix this in a year, but it will be a continued growth area. There is a 30 percent increase in housing starts this year.”

With the builder’s confidence hitting a seven -year high and the constructions of new homes trying to keep up with the demand, it appears that the outlook for the housing market is continuing to gain momentum.

Please contact us to learn about real estate opportunities in Breckenridge and Summit County, Colorado. 800.774.7970 or 970.453.2200.

Source: RISMedia

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