Home Builders Expect More Home Sales Ahead… And They’re Usually Right!

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Homebuilders know their business pretty well. Over the last 3 years, they've projected their own single-family sales with surprising accuracy.

The Monthly Homebuilder Survey

Each month, the National Association of Homebuilders polls its members to get a pulse of the market. In its compiled format, the survey is called  the Housing Market Index (HMI), but its familiar name is the "Homebuilder Confidence Survey".

HMI is basic -- it asks builders 3 questions, with three possible answers : "Good", "Fair" or "Poor". The results are then compiled and expressed as a number between 1-100.

The 3 questions are:

1. How are market conditions for the sale of single-family homes?
2. How are market conditions for the sale of single-family homes 6 months from now?
3. How heavy is prospective buyer foot traffic?

Readings above 50 are considered "favorable conditions". Readings below 50 are "unfavorable conditions".

Today, HMI is 16. It hasn't been north of 50 since April 2006.

Builders Predict Future Home Sales Pretty Well

The Housing Market Index helps to gauge broader builder sentiment. It's read 16 for five of the last six months, and has held within a tight range for the last year.

In other words, builders feel the same today about their market as they have for the past year -- lousy.

But for home buyers in Cincinnati, Fairfax, Bethesda, or anywhere else, the HMI carries a choice piece of data worth watching. It's the second survey question that asks builders about their 6-month market expectations.

Going on 3 years now, builders have been spot-on with predictions.

When builders say sales will rise, they rise. When builders say sales will fall, they fall. In fact, the only time the builders have been wrong was when the market tanked in late-2008, which led to the creation of the Home Buyer Tax Credit.

Other than that, it's clear that builders know their business.

Read Between The Lines : The Market Is Rocketing

Six months ago, the Housing Market Index projected a "flat" new home sales market for March 2011. We'll see that data from the Census Bureau next week. However, if we look at next month and the four months since, new home sales are huge.

This means that April, May, and June's market will be especially strong.

If you're in the market for a new home right now, you're probably already seeing it. Competition for new homes is higher, builders are giving fewer incentives to buyers, and home prices are sustaining across the board.

Plus, according to the HMI survey, these pressures should continue for another 6 months at least.

Get Pre-Approved So You Bid (And Close) Quickly

When you're shopping for a newly-built home, have a pre-approval letter. It not only shows the builder that you're serious, but just by getting pre-approved, you're able to bid and close on your home faster than the next guy. And speed helps.

All things equal, builders want to close quickly. If you're pre-approved, you can do that.

To get a free pre-approval (and to check mortgage rates while you're at it), call me at 513-443-2020, or.

I love to work with my readers and my mortgage rates are excellent.