October Home Builder Confidence Marks 3rd Straight Record High

Builder confidence in the market for newly built single-family homes increased to record levels for the third consecutive month, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index increased by two points to 85 in October, further surpassing the previous record high of 83 in September, marking the first two months the index has ever been above 80.

Every HMI index posted or matched their highest readings in October. The index gauging current sales conditions rose by two points to 90; the component measuring sales expectations in the next six months increased by three points to 88; and the measure charting traffic of prospective buyers held steady at 74.

Three-month moving averages for regional HMI scores showed the Northeast increased by six points to 82; the Midwest increased by three points to 75; the South rose by three points to 82; and the West increased by five points to 90.

“The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB Chief Economist Robert Dietz. “NAHB analysis published last week showed that new single-family home sales are outpacing starts by a historic margin. Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of month’s supply.”

“Traffic remains high and record-low interest rates are keeping demand strong as the concept of ‘home’ has taken on renewed importance for work, study and other purposes in the Covid era,” said NAHB Chairman Chuck Fowke. “However, it is becoming increasingly challenging to build affordable homes as shortages of lots, labor, lumber and other key building materials are lengthening construction times.”

Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said low mortgage rates and an increased desire for more space continues to drive buyer traffic and sales.

“The rapid recovery in confidence is primarily owed to historically low mortgage rates and the ongoing shift in housing preferences for more livable space to adjust to new COVID norms,” Vitner said. “Prospective buyers have more time to shop this year, given that travel is down and football game attendance is being severely limited, freeing up additional time on the weekends.”