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New Construction Market Expected To Soar This Summer

Posted May 16, 2012

New Construction Market Expected To Soar This Summer

NAHB HMI

NAHB HMI Buyers of new construction are on the clock. With builder confidence rising and new home sales expected to pop, the best time to buy a new home this year may be right this very minute.

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Builder Confidence At 5-Year High

After a seasonal dip in April, the National Association of Homebuilders reports that the May Housing Market Index rose 5 points to 29.

The 5-point jump marks the sharpest one-month climb for homebuilder confidence in close to 10 years.

It also raises the benchmark index to a 5-year high.

As an index, the NAHB's homebuilder confidence report is scored from 1-100. Readings north of 50 indicate favorable conditions for builders. Readings south of 50 indicate unfavorable conditions.

The HMI has been below 50 since April 2006. It's never been higher than 78 (December 1998).

Buyer "Foot Traffic" Soaring

The Housing Market Index is different from most home market statistics in that it's a psychological reading as opposed to a physical one. It doesn't measure actual homes sold but builders' expectation for how many homes will sell.

The HMI is a composite of three separate surveys sent to NAHB members. The survey questions are as follows :

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

Based on the responses from homebuilders, the Housing Market Index is scored.

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points from April; sales expectations for the next 6 months are up 3 points form April; and, perhaps most importantly, buyer foot traffic is up 5 points from April and is now its highest point since 2007.

Higher "buyer foot traffic" tells us there's an increased demand for new construction -- the highest in 5 years, actually.

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Buying New? Find Your Mortgage Budget.

With buyer traffic up and home supplies down, new construction prices appear set to rise later this summer. And, although builders aggressively compete with home resales and foreclosures for today's home buyers, don't expect to buy a home on a steal.

Builders know their market and price it right.

The good news, though, is that mortgage rates remain low and low downpayment programs are plentiful. In addition to the FHA's 3.5% downpayment program, the VA and the USDA both offer 100% financing to home buyers who meet underwriting criteria.

Have you seen today's mortgage rates? Click here to get rates.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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