Home Builder Confidence Back to Pre-Coronavirus Levels

Builder confidence in the market for newly built single-family homes jumped 14 points to 72 in July, the National Association of Home Builders reported yesterday, calling it a “strong signal” that the housing market is ready to lead a post-COVID economic recovery.

The NAHB/Wells Fargo Housing Market Index (now stands at the pre-pandemic reading in March before the outbreak affected much of the nation.

All HMI indices posted gains in July. The index gauging current sales conditions jumped 16 points to 79; the component measuring sales expectations in the next six months rose seven points to 75; and the measure charting traffic of prospective buyers posted a 15-point gain to 58.

All four regions gained as well—the Northeast surged 22 poinst to 70; the Midwest jumped 18 points to 68; the South increased 10 points to 73; and the West increased 14 points to 80.

“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”

NAHB Chief Economist Robert Dietz said while the housing market is “clearly rebounding,” challenges persist. “Lumber prices are at a two-year high and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist,” he said. “Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”

Earlier this week, the Mortgage Bankers Association Builder Applications Survey reported a similar surge. The Survey reportred June mortgage applications for new home purchases increasing by 54.1 percent from a year ago and by 20 percent from May.

“The new home purchase market continues to recover,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.