Despite obstacles, builders are confident that the housing market, especially for newly built single-family homes, is on its road to recovery, the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) shows.
The index has increased three points to 40 in September making it the fifth consecutive increase and the highest reading since June 2006.
“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” NAHB chairman Barry Rutenberg said in a statement. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work – which would create needed jobs -- and discouraging consumers from pursuing a new-home purchase.”
According to the index, a positive trend is noted in consumer traffic, current sales conditions and future sales prospects.
Meanwhile, hurdles such as low inventory in certain markets and increasing building material cost have to be addressed, NAHB chief economist David Crowe said. “Given the fragile nature of the housing and economic recovery, these are significant red flags,” he said.
Construction Costs
According to a report released by the Associated General Contractors of America, the cost of key construction materials showed a year-to-year increase in August.
“After years of depressed construction activity, the last thing contractors need is to see materials price increases further erode their already slim margins,” said Stephen E. Sandherr, the association’s chief executive officer, in a statement. “This isn’t the kind of economic recovery most contractors spent the past few years praying for.”
He pointed out that price increase of several key materials such as diesel fuel and gypsum products will prove costly to contractors. For instance, the price index for diesel fuel jumped 5.2 percent in August from a year ago. Similarly, that for gypsum products increased 17.8 percent compared to August 2011, the report showed.
