Builder Confidence Holds Firm in September

Builder confidence in the market for newly built single-family homes remained unchanged at 67 in September, the National Association of Home Builders said yesterday.

The NAHB/Wells Fargo Housing Market Index reported current sales conditions rose one point to 74; the component gauging expectations in the next six months increased by two points to 74. Meanwhile, the metric charting buyer traffic held steady at 49.

Regionally, three-month moving averages for regional HMI scores saw the Northeast rise one point to 54, while the South remained unchanged at 70. The West edged down a single point to 73 and the Midwest fell three points to 59. Any number over 50 indicates that more builders view conditions as good than poor.

“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chief Economist Robert Dietz. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced. Wages and subcontractor payments continue to rise as the labor market for residential construction sector remains tight.”

Last week, the Mortgage Bankers Association reported mortgage applications for new home purchases fell by 2 percent in August from July and by 4.6 percent from a year ago. The average loan size of new homes decreased from $337,775 in July to $332,801 in August.

MBA estimated new single-family home sales at a seasonally adjusted annual rate of 669,000 units in August, based on data from the BAS, an increase of 5 percent from the July pace of 637,000 units. On an unadjusted basis, MBA estimated 53,000 new home sales in August, unchanged from July.

Dietz said a growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish,” he said. “Interest rates are also forecasted to keep rising.”