After the US house sales prices peaked in mid-2006, the steep price collapse that began in December 2007 triggered an 18-month long recession. Plunging prices had a devastating effect on new home sales even as existing homes flooded the market. According to data, the inventory of unsold new homes rose 9.8 times the December 2007 sales volume. Not to mention the four million existing homes that were put up for sale.
But, all that seems like a distant memory today as home builders exude renewed confidence.
According to the latest Housing Market Index (HMI) figures from The National Association of Home Builders (NAHB), builder confidence in the market for newly built, single-family homes jumped six points to reach a 5-year high of 35. This is the highest monthly gain in the index since September 2002, when the index gained eight points.
The HMI is based on a monthly survey of NAHB members designed to gauge the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next 6 months as "good," "fair" or "poor.". The survey also asks builders to rate the traffic of prospective buyers of new homes. Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Though the HMI is still below the 50 milestone, which indicates good conditions, it is still reflective of the continued, gradual improvement in the housing market and the growing optimism. The last time it breached the 50 milestone was in early 2006. The index which has been measured for the past 25 years reached a historic low of 8 in January, 2009. The historic high was 77, which was achieved twice, in November 1998 and June 1999.