Home Builder Index Indicates Sales Will Return

by Mark Wellborn


Low interest rates and first-time buyers getting back into the market resulted in the National Association of Home Builders’ sentiment index increasing to its highest level since last September.

In May, the index rose to 16, two points higher than in April. The index, a measure of sales conditions and expectations for the next six months, is still at historically low levels, but the increase is a sign that the market is getting better. (The index went down to 6 in January.)

From the NAHB press release:

“Builders are responding to what they perceive to be some of the best home buying conditions of a lifetime,” NAHB Chairman Joe Robson said. “You’re not likely to get a better deal in terms of mortgage rates than what’s available right now. Combine that with the affordable prices, multitude of home choices and $8,000 tax credit for first-time buyers that are now available, and you have a very appealing set of reasons to make a move.”

While the move upward is good news, there is still a ways to go before things are significantly better. Before the housing market crashed, the index had never fallen below 20.

This article originally published at http://dc.urbanturf.com/articles/blog/home_builder_index_indicates_sales_will_return/922

1 Comment

  1. Jan Johnson said at 10:31 am on Tuesday May 19, 2009:

    Really? You’re really sure the home builder sentiment index is a reliable sign that sales will return?

    Interesting. Even though total housing starts were at 459 thousand (SAAR) - the lowest number since 1959 with no uptick? Even though permits (a great leading indicator) for single family housing is down to 373 thousand (SAAR)?

    Might it be that the sentiment index has a horrible survivor bias? The ones out of business no longer report, and the ones still in business always had higher sentiment? Just asking.

    Yeah. not too sure on that myself. Keep your eye on the 10-year treasury. More down ticks there, and I guarantee a deeper hole.

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