Builders’ confidence in the market for new single-family homes was steady this month as the National Association of Home Builders' housing market index remained at 67 in September from August.
IFR's poll of economists predicted the index would dip to 66.
“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” the NAHB said in a Tuesday release. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced. Wages and subcontractor payments continue to rise as the labor market for residential construction sector remains tight.”
The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased two points to 74. Meanwhile, the metric charting buyer traffic held steady at 49. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 54 and the South remained unchanged at 70. The West edged down a single point to 73 and the Midwest fell three points to 59.
“A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward. However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish,” the NAHB said. “Interest rates are also forecasted to keep rising. We nonetheless expect some market disruption effects due to the impact of Hurricane Florence. Single-family construction in North Carolina, South Carolina and Virginia makes up 12% of national production.”
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.
