The latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) showed builder confidence in the market for newly-built single-family homes rose one point to 68 in September.
The HMI sentiment has been in the mid-to-upper 60s since May. The HMI reports that builder optimism in recent months has been fueled by low interest rates and solid homebuyer demand.
“However, the trade dispute with China is a growing headwind for the industry, both raising the cost of construction inputs and holding back demand in parts of the country that rely on the manufacturing sector,” the report states.
NAHB’s latest Home Building Geography Index revealed that home construction in manufacturing areas started weakening in Q4 2018.
The HMI index gauging current sales conditions increased two points to 75 and the reading on prospective buyers held steady at 50. The measure following sales expectations over the next six months fell one point to 70.
The northeast posted a two-point gain to 59 in the three-month moving averages for HMI scores. The west also saw a two-point jump to 75, while the south moved one point higher to 70. The midwest was unchanged at 57.
While the HMI showed increased confidence for builders, the Census Bureau’s New Residential Construction Survey for July was more of a mixed bag.
Building permits in July grew month-over-month by 8.4% to 1.33 million, and 1.5% annually. Single-family authorizations also grew for the month, rising 1.8% from the month prior.
Falling, however, were housing starts, which declined 4% from June to 1.91 million, although still being 0.6% higher than a year ago. Single-family housing starts in July came in at 876,000—1.3% above June’s rate of 865,000.
Odeta Kushi, Deputy Chief Economist for First American Financial Corporation said that homebuilders are reluctant to break ground on new projects if they hear the economy may slump later. Additionally, she said consumers are hesitant to make a large investment if they fear losing their jobs.
“Over the last 40 years, a year-over-year decline of 20% or more in single-family housing starts has preceded all but one (2001) of the five recessions,” she said.