September Home Builder Confidence Surges

The National Association of Home Builders reported builder confidence in the market for newly built, single-family homes in September jumped six points to its highest level since last October.

The NAHB/Wells Fargo Housing Market Index rose to 65 in September from a downwardly revised 59 in August. All three HMI components moved higher in September. The component measuring current sales expectations rose six points to 71 and the gauge charting sales expectations in the next six months increased five points to also stand at 71. The index measuring traffic of prospective buyers posted a four-point gain to 48.

Three-month moving averages for HMI scores posted gains in three out of the four regions. The Northeast and South each registered a one-point gain to 42 and 64, respectively, while the West rose four points to 73. The Midwest was unchanged at 55.

“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” said NAHB Chief Economist Robert Dietz. “Though solid job creation and low interest rates are also fueling demand, builders continue to be hampered by supply-side constraints that include shortages of labor and lots.”

“Tight inventories, low mortgage rates and strong job and income growth continue to support home sales,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “The big six-point rise in the NAHB index may signal some easing in supply constraints at smaller builders, which have been weighing on the overall index.”

“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 NAHB Chairman Ed Brady. “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 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 traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.