Builder Confidence Trending Higher as Interest Rates Move Lower
The HMI index gauging current sales conditions for newly built single-family homes increased two points to 73, and the component measuring traffic of prospective buyers rose two points to 50.
Builder confidence in the market for newly built single-family homes rose one point to 66 in August, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Sentiment levels have held at a solid 64-to-66 level for the past four months.
“Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” Greg Ugalde, NAHB chairman and a home builder and developer from Torrington, Conn.
“While 30-year mortgage rates have dropped from 4.1% down to 3.6% during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” said Robert Dietz, chief economist for the NAHB. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.”
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI 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.
The HMI index gauging current sales conditions increased two points to 73, and the component measuring traffic of prospective buyers rose two points to 50. The measure charting sales expectations in the next six months fell one point to 70.
Looking at the three-month moving averages for regional HMI scores, the South moved one point higher to 69, the West was also up one point to 73, and the Midwest inched up a single point to 57. The Northeast fell three points to 57.