Thanks to deal-seeking consumers entering the market, the National Association of Homebuilders (NAHB)’s confidence index rose slightly this month[1]. While the score is still low at 15 – anything higher than 50 indicates that the majority of builders view the market is good instead of poor – it rose slightly from 13 last month and has held within a three-point range for nine of the past 10 months. Bob Nielson, NAHB chairman, says that these two trends together indicate that “the outlook perhaps isn’t quite as bleak as was feared in June,” though he admitted that builders still face “serious challenges” from foreclosed properties on the market and must deal with inaccurate appraisals of new homes and a “very restrictive lending environment for new home construction.”

However, analysts point to the source of the index increase, the “builder expectation” component, as a potential flaw in this new positive outlook[2]. “Builder expectations” are nothing more than that: what builders think or hope will be happening in the next 6 months. And while the real estate market is always subject to and shaped by public perception, basing a positive outlook on the fact that homebuilders are feeling a little – emphasis on little – more optimistic this month could be argued to verge on a Pollyanna level of positivity.

Do you think that the market is looking up for builders and new construction?

Similar Posts:

Share