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Winter Conditions Chill Home Builder Confidence

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Mortgage Daily

                                                 February 17, 2015

Home builder confidence has somewhat diminished as a result of heavier-than-usual winter precipitation. But an improvement is in this year’s forecast.

This month’s National Association of Home Builders/Wells Fargo Housing Market Index, a measure of builder confidence, came in at 55.

The seasonally adjusted index is determined based on a survey that asks builders to rate their six-month outlook as “good,” “fair” or “poor.”

In addition, builders are asked
to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

An index in excess of 50 indicates
that there are more builders who view conditions as good than those who view them as poor.

In January, the index was higher at 57.

“Overall, builder sentiment remains fairly solid, with this slight downturn largely attributable to the unusually high snow levels across much of the nation,” NAHB Chairman Tom Woods said in the report.

There are three components to the index.

The first component, which gauges current sales conditions, dropped one point to 61 in February.

Another component that measures buyer traffic dropped five points from January to 39.

The third component, a reading on expected sales over the next six months, was unchanged at 60.

By region,
the three-month moving average was 68 in the West, two points more than in January and the highest in the nation.

A two-point drop left the index at 54 in the Midwest and 57 in the South.

The index in the Northeast slipped a point to 46.

“For the past eight months, confidence levels have held in the mid- to upper 50s range, which is consistent with a modest, ongoing recovery,” NAHB Chief Economist David Crowe stated in the report. “Solid job growth, affordable home prices and historically low mortgage rates should help unleash growing pent-up demand and keep the housing market moving forward in the year ahead.”

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