In a recent article from the National Association of Home Builders (NAHB), builder confidence remains strong this month. While many builders have concerns about the cost of building a new home – materials, labor and an increase of regulations to navigate – they remain confident that demand for newly built homes will remain strong for the next quarter. Affordability is also a concern. The cost of a new home is on the rise due to the aforementioned issue of lack of labor, increase in the cost of materials etc. The good news is that lumber is finally falling in price and interest rates are still relatively low, though there is speculation that interest rates will be rising in the near future. Continue below for the full article.
Builder Confidence Remains Firm in September
(NAHB), Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 67 reading in September on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “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.”
“A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” said NAHB Chief Economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market 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 that more builders view conditions as good than poor.
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.
Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.