Builder Confidence Bounces Back with Four-Point August Jump
Builder confidence in the market for newly built single-family homes rose four points in August to a 68 on the National Association of Home Builders/Wells Fargo Housing Market Index.
NAHB credited rising demand in the new-home market due to ongoing job and economic growth, attractive mortgage rates and growing consumer confidence for the boost in confidence.
“The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market,” said NAHB Chief Economist Robert Dietz. “GDP growth improved in the second quarter, which helped sustain housing demand.”
But Dietz said builders continue to face supply-side challenges including lot and labor shortages and rising building material costs.
Last week the Mortgage Bankers Association’s Builder Application Survey reported mortgage applications for new home purchases increased 5.1 percent between July 2016 and July 2017
Compared to June 2017, applications decreased by 12 percent, the MBA Builder Applications Survey said. This change does not include any adjustment for typical seasonal patterns.
“The year-over-year increase in applications to homebuilders for new home purchase mortgages slowed down somewhat in July after relatively strong showings in May and June,” said MBA Vice President of Research and Economics Lynn Fisher. “Nonetheless, the pattern of applications over the last three months suggests that housing starts will fall off less than expected during late summer and early fall as demand spills over from the low-inventory existing home market into the market for new homes.”
Fisher noted that year to date through July, applications for new homes remain up by more than 7 percent compared to the same period last year.
The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate their prospective buyer traffic as “high to very high,” “average” or “low to very low.” These scores yield a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted gains in August. The component gauging current sales conditions rose four points to 74 while the index charting sales expectations in the next six months jumped five points to 78. The component measuring buyer traffic increased a single point to 49.
Looking at the three-month moving averages for regional Housing Market Index scores, the northeast rose one point to 48. The west, south and Midwest all remained unchanged at 75, 67 and 66, respectively.
