MortgageReal Estate

Homebuilder confidence hits 10-year high, again

Homebuilders haven’t been this confident since before the housing crisis

The nation’s homebuilders’ confidence in the market for newly constructed single-family homes continued rising in October, to a level not seen since before the housing crisis began.

The good news comes from the latest edition of the National Association of Home Builders/Wells Fargo Housing Market Index, which rose three points in October to 64.

The Housing Market Index hasn’t been that high since late 2005.

The increase is part of a trend that has seen the HMI climb over the last several months.

In September, the HMI rose one point to 62, following an increase to 61 in August – both of which were the highest level in 10 years at the time.

“The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” said NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri.

“However, our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor,” Woods added.

Two of the three HMI components saw gains in October.

The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70.

The index charting buyer traffic held steady at 47. This suggests that high rental prices may be pushing potential first-time buyers into the market.

Derived from a monthly survey that NAHB has been conducting for 30 years, 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 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.

Regionally, the three-month moving averages for all four regions posted gains. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively.

“With October’s three-point uptick, builder confidence has been holding steady or increasing for five straight months,” said NAHB Chief Economist David Crowe.

“This upward momentum shows that our industry is strengthening at a gradual but consistent pace,” Crowe added. “With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015.”

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