The National Association of Home Builders/Wells Fargo Housing Market Index had its highest reading since June 1999 in December, with the HMI hitting 76.
The NAHB states that builders are continuing to see the housing rebound that began in the spring, which is supported by a low supply of existing homes, low mortgage rates, and a strong labor market.
However, while the NAHB says there are near-term positive market conditions with unemployment at a 50-year low, “we are still underbuilding” due to supply-side constraints such as labor and land availability.
“Higher development costs are hurting affordability and dampening more robust construction growth,” the NAHB said.
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.”
The survey asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.”
All three of the HMI components registered gains in December. The HMI index gauging current sales conditions rose seven points to 84, the component measuring sales expectations in the next six months rose one point to 79, and the measure charting traffic of prospective buyers increased four to 58.
Regionally, the Northeast’s HMI fell two points to 61, the Midwest rose five points to 63, the South rose one point to 76, and the west grew by three points to 84.
Earlier in December, the Census Bureau reported that residential construction spending fell 0.9% to $508.2 billion in October from September’s $512.6 billion.
New single-family housing construction rose 1.6% from September to $279 million but is down 3.1% year-over-year from October 2018’s $288 million.
Single-family spending has been increasing month-over-month from June 2019 when residential spending was $264 million.
The National Association of Home Builders reported last month the average single-family lot price reached a new high in 2018, with half of the lots selling at or above $49,500.