New home index falls to lowest point in 10 months

After holding at a low but steady level for the past six months, builder confidence in the market for newly built, single-family homes declined three points in June according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

The last time the index was this low was in September of 2010.

“Builders are being squeezed by the continuing weakness in existing-home prices – against which they must compete – as well as rising material costs,” said Bob Nielsen, NAHB chairman. “In addition to the ongoing impacts of distressed property sales on home prices, appraisal values and consumer confidence, rising costs for materials such as roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. June’s composite score was 13.