US home builders gain confidence in May, ending three-month slide

15 May 2013 18:02  [Source: ICIS news]

WASHINGTON (ICIS)--Market confidence among US housing contractors rose in May, their trade association said on Wednesday, ending a three-month slide and raising hopes for renewed gains in sales of new single-family homes.

The National Association of Home Builders (NAHB) said that its monthly housing market index (HMI) rose to 44 in May, a gain of three points from the downwardly revised April reading of 41.

April’s HMI originally had been put at 42.

The index had been in a mild but steady decline since January, raising concerns that the long-awaited US housing recovery might be in trouble. 

The HMI reached its most recent high mark of 47 in December 2012 and January this year, but then slipped to 46 in February, 44 in March and down to 41 in April.

During that three-month slide, home builders complained of on-going tight bank lending criteria amid steadily increasing costs for building materials and skilled workers.

Tight lending criteria, a persistent hold-over from the 2006-2007 subprime mortgage crisis and resulting housing market collapse, make it difficult for many builders to get property development loans. Stringent lending terms also make it hard for would-be home buyers to get mortgage loans.

The HMI is a compilation of three subsidiary measures: home builders’ current sales of single-family homes; the number of prospective home buyers visiting model homes; and contractors’ expectations for home sales over the next six months.

On the 1-100 HMI scale, a reading of 50 or above indicates that home builders are confident about their prospects over the next six months.

During the US housing boom years of 2002-2005, the housing market index had held steady in the mid-60s and even topped 70 at times.

At the bottom of the US 2008-2009 recession, the HMI hit an all-time low of 8 in January 2009.

After bouncing around in the middle teens for the rest of 2009 through most of 2011, the HMI measure of builder confidence began an apparent recovery in early 2012 but then seemed to peak at 47 in December-January.

The May upturn in the HMI, said NAHB chairman Rick Judson, “is definitely an encouraging sign, even amid rising challenges with regard to the cost and availability of building materials, lots and labour”.

Judson said: “Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies.”

The housing market, especially new home construction, is a key downstream consuming sector for chemicals and resins.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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