Real Estate

Builder confidence rebounds from shock of recent hurricanes

Could soon see material price increases and labor shortages

Builder confidence increased in October as homebuilders recovered from the initial shock of the recent hurricanes, according to the latest Housing Market Index from the National Association of Home Builders and Wells Fargo.

Builder confidence in the market for newly built single-family homes increased four points to 68 in October, more than making up for last month’s three-point drop, and rising to its highest point since May.

“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” NAHB Chairman Granger MacDonald said. “However, builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the 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 most homebuilders view conditions as good rather than poor.

All three of the index’s components increased in October including the component that measures current sales conditions, which increased five points to 75. The index charting sales expectations over the next six months also increased five points to 78 while the component which looks at buyer traffic rose one point to 48.

“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” NAHB Chief Economist Robert Dietz said. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”

And homebuilders aren’t the only ones who see mounting potential for new home sales. Freddie Mac’s monthly Outlook for September forecasted new home sales will be the main driver of total home sales going into 2018.

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