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Real Estate

Builder confidence hits new high for 2016

More serious buyers as incomes rise

Builder confidence in September hit a new high for 2016, in fact it’s at its highest since October last year, according to the most recent Housing Market Index released by the National Association of Home Builders and Wells Fargo.

The HMI increased six points to 65 in September, up from August’s downwardly-revised 59.

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI categorizes 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.

“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, a home builder and developer from Bloomington, Illinois.

“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,” Brady said.

Household income posted its first significant increase in eight years, new data from theU.S. Census Bureau showed

“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.”

San Francisco’s competitive employment market is even causing many construction companies to lose workers and driving a trend towards more expensive housing.

All three HMI components moved higher in September. The component that measures current sales expectations rose six points to 71 while the component measuring sales expectations in the next six months increase five points to 71. The index measuring traffic of prospective buyers also increased by four points to 48.

The HMI did not decrease in any region of the U.S. The Northeast and South increased one point each to 42 and 64 respectively, and the West increased four points to 73. The Midwest remained unchanged at 55.

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