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Optimism Among Home Builders Continues
HMI Forecasts Strong Sales Ahead

The National Association of Homebuilders' Home Market Index for August improved one point to 61. This survey has been in the 60s for the last three months. Readings above 50 mean more survey participants believe market conditions are good rather than poor.

Builders continue to have above-average confidence in the market for new single-family homes, the latest National Association of Homebuilders survey shows.

The NAHB's Housing Market Index for the month of August improved one point to 61, the highest reading since November 2005. Any number above 50 shows more builders consider housing conditions to be good rather than poor. The NAHB has been conducting its monthly survey for 30 years.

Builders are asked to evaluate current single-family home sales, sales expectations for the next six months, and traffic of prospective buyers. Scores for each component are then used to calculate a seasonally adjusted HMI. The builder's association asks some questions that can be answered as "good," "fair" or "poor," and other questions that have to be answered as "high to very high," "average" or "low to very low."

In the August survey, builders' opinions about current sales conditions rose one point to 66. Sales expectations remained unchanged at 70, while traffic of prospective buyers rose to 45 from 43.

The HMI has been in the 60s since June, and it has ranged from 52-57 from January to May.

Readings in the low 60s are evidence that the single-family housing market is making steady progress in its attempt to recover from the housing crisis of a few years ago, Tom Woods, chairman of the NAHB, said.

The latest HMI is consistent with the NAHB's forecast that the single-family housing sector will gradually strengthen, David Crowe, chief economist of the NAHB, said.

"Job and economic gains should keep the market moving forward at a modest pace for the rest of the year," Crowe added. But Woods also offered this word of caution: "However, we continue to hear that builders face difficulties accessing land and labor."

The NAHB also compiles HMIs by region. Those are as follows: The Midwest jumped one point to 59; the Northeast dropped to 43 from 49; the South climbed one point to 63; and the West went up two points to 65.

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An index that gauges nonresidential building projects in the initial planning stages has been in a general rising trend for the last four years.

The Dodge Momentum Index continued its upward momentum -- albeit in a "saw tooth" sort of way -- with a July reading of 125.3, a 5.4 percent hike from its June score of 118.9.

Dodge Data and Analytics compile data monthly on nonresidential projects in the early stages of development, which typically takes place a full year before construction spending.

After some economic doldrums in the first half of 2015, the July increase returns the Dodge Momentum Index "to its generally rising trend of the last four years," Dodge Data said in a news release.

Real estate market fundamentals in the commercial sector have improved, and bond-related funding for institutional projects has increased of late.

These and other factors should continue to "exert a positive influence" on the Dodge Momentum Index for the rest of 2015, the company said.

The increase in July, compared to June, was powered by strong gains in institutional planning, up 6.0 percent, and commercial planning, up 4.9 percent.

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November 20, 2019, 1:42 pm PDT

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