The Housing Market Index survey measures the level of market confidence for local home builders and other industry professionals on a scale of zero to 100 with 50 representing a neutral or average rating. The three main components of the index were mixed in July with the current conditions rating increasing one point to 65 while the expected conditions during the next six months index fell three points to 66. That drop was offset by a three-point hike in traffic conditions to 47.

The one-point difference between current conditions and future conditions is the narrowest gap between the two indices since the HBA began conducting the survey last year. The narrow gap may suggest that home builders are reaching a point where they may expect the pace of new-home construction to level off, said HBA Executive Vice President Tim Underwood. Metro single-family home permits rose 7 percent in 2003 and were up 8 percent through the first six months of 2004.

“Home builders are seeing the prospects for higher mortgage rates and higher housing costs and coming back with lower expectations,” Underwood said. “While home construction nationwide is leveling off, Kansas City has remained strong because home builders see a strong demand for new-home ownership. The challenge will be in providing product demanded by the marketplace – more new homes for first-time buyers, empty-nesters, singles and working families.”

Home builders in the lowest price ranges remained the most confident with single-family builders in the under $225,000 price range raising expectations four points to 53. Meanwhile, the index for home builders in the $450,000 to $600,000 price range fell 18 points to 50 and the index for home builders in the $600,000 and up price range fell 24 points to 41.

Confidence ratings based on metro locations remained largely stable in July, ranging from a low of 58 in the Johnson/Miami counties market to a high of 68 in Wyandotte/Leavenworth counties. The single-family attached home index rose three points to 58 while the more volatile multi-family index fell 11 points to 43.

The Housing Market Index is based on a similar survey conducted monthly by the National Association of Home Builders. The “builder confidence survey” is considered to be an accurate barometer for evaluating the present and future strength of the housing industry. The survey asks home builders and other industry professionals to rate present conditions, expected conditions during the next six months and consumer traffic. The results are tallied using a scale from 0 to 100, with 50 being considered a neutral or “average” rating.