Builder confidence inches up in September

Washington, DC—Builder confidence inched up in September on lower lumber prices and strong housing demand, according to the National Association of Home Builders (NAHB). Ending a three-month decline, builder sentiment in the market for newly-built, single-family homes edged up one point to 76 in September, according to the most recent NAHB/Wells Fargo Housing Market Index (HMI).

“Builder sentiment has been gradually cooling since the Housing Market Index hit an all-time high reading of 90 last November,” said NAHB chairman, Chuck Fowke. “The September data show stability as some building material cost challenges ease, particularly for softwood lumber.”

NAHB chief economist, Robert Dietz, added, “The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity, as reflected in the September HMI.”

NAHB said it expects housing affordability will be a key demand challenge in the coming quarters, given the rapid rate of growth for home prices and construction costs over the last year.

“Regionally, we continue to see growth in the south and the west, particularly the mountain west,” Dietz said. “Exurban markets have expanded the most over the last year, although inner suburbs are now experiencing an acceleration, with townhouse construction having had the best quarter in 14 years this spring.”

Derived from a monthly survey that NAHB has been conducting for 35 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 used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

According to NAHB, the HMI index gauging current sales conditions rose to 82. The component measuring traffic of prospective buyers posted a two-point gain to 61 and the gauge charting sales expectations in the next six months held steady at 81.

Looking at the three-month moving averages for regional HMI scores, the northeast fell two points to 72, the south dropped two points to 80 and the west registered a two-point decline to 83. The midwest remained unchanged at 68.

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