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Builder Confidence Soars to 11-Month High

Builder confidence measured by the National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (HMI) has been up and down all year, enduring slight fluctuations. For September, however, builder confidence for newly-constructed single-family homes rose to its highest level in nearly a year.

September’s HMI reading came in at 65, the highest level since October 2015 and an increase of six points from August’s downwardly revised reading of 59. Despite tight inventory for both new and existing homes, builders are confident that market conditions are positive for new single-family home construction, according to NAHB.

The HMI’s three components (builder perceptions of current single-family home sales, sales expectations for the next six months, and prospective buyer traffic) are scored and then averaged; an index score over 50 indicates that more builders view conditions as good rather than poor.

Solid job growth and near-record low interest rates are driving demand for single-family homes, while builders continue to face headwinds such as shortages of both labor and building lots.

“As household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward,” said Robert Dietz, chief economist with NAHB. “The single-family market continues to make gradual gains and we expect this upward momentum will build throughout the remainder of the year and into 2017.”

The HMI for September saw all three components rise from the previous month. The current sales expectations component jumped by six points up to 71 from August to September, while the component measuring sales expectations for the next six months climbed five points, also up to 71. The prospective buyer traffic index posted a gain of four points up to 48, according to NAHB.

The three-month moving averages for the HMI increased in three out of four regions: in the Northeast and South, the HMI level inched up by one point to 42 and 64, respectively. In the West, the HMI jumped by four points up to 73. The only region that did not experience an increase from August to September was the Midwest, where the reading remained unchanged at 55.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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