The Home Buyer's Korner

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May 18th, 2015

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Home Builder Confidence Drops 2 Points

new home

It’s the busiest time and peak season for the housing market, but home builders are less optimistic as we move through spring and into the summer months. Builder confidence dropped two points in May as reported by the National Association of Home Builders (NAHB). It now stands at 54, with 50 as the line between positive and negative sentiment.

New Home Buyers are caution this season and want to see stable financial conditions for Main Street before taking the plunge and purchasing a home. On the positive side, the HMI component measuring future sales expectations has been increasing all year. Mortgage rates remain under 4.0 percent and home prices haven’t skyrocketed like they did last year in many parts of the country. Hopefully the factors will help release pent-up demand as we move further into spring and summer, but they haven’t so far.

Would-be home buyers still facing tight credit conditions although our plutocrats in Hollywood East promised easing conditions way back in late 2014. Although home price aren’t increasing as much as they did in 2014, they are rising faster than income and employment growth.

Sales of new homes built homes in March fell a little over 11 percent month-to-month, according to the U.S. Census and mortgage applications were flat in April, which points to April’s new home sales as being lower.

The average loan size for a newly built home increased to a record $315,670, as builders continue to focus on high end home  buyers, realizing the so-called economic recovery has all but forgotten millennial home buyers.

Builders are less confident overall and their sentiment is once again indicative of a floundering recovery. The NAHB index has three components:

Sales Expectations over the Next Six Months, which rose one point to 64;

Buyer Traffic, which dropped one point to 39 and;

Current Sales Conditions, that fell two points to 59.

On a three-month moving average, Builder Confidence in the South and Midwest rose one point to 57 and 55, respectively. In the Northeast, it fell by one point to 41, and in the West it dropped three points to 55.

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