Oct. NAHB housing index gains, but affordability issues remain
Builders’ confidence in the market for new single-family homes climbed as the National Association of Home Builders' housing market index grew to 68 in October from 67 in September.
IFR's poll of economists predicted the index would be 67.
"The slight uptick in the housing market index in October is a positive sign of increasing consumer confidence in the durability of strength in the US economy," said Inna Khidekel, managing director in the Capital Markets Group at Bridge Investment Group. "However, it is difficult to see the numbers recovering to last winter’s highs given continued affordability concerns, particularly in a rising interest rate environment, which increases the cost of owning."
“Builders are motivated by solid housing demand, fueled by a growing economy and a generational low for unemployment,” NAHB Chairman Randy Noel said. “Builders are also relieved that lumber prices have declined for three straight months from elevated levels earlier this summer, but they need to manage supply-side costs to keep home prices affordable.”
“Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases,” according to NAHB Chief Economist Robert Dietz. “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.”
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 either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "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 sales conditions as good than poor.
The current single-family home sales index rose to 74 from 73, the sales expectations index for the next six months gained to 75 from 74; and the traffic of prospective buyers index jumped to 53 from 49.