Builder confidence inches up in September

Washington, DC—According to the National Association of Home Builders (NAHB), construction company confidence rose in September on the back of lower wood prices and strong housing demand. After a three-month decline, construction sentiment in the new-build single-family home market was up one point to 76 in September, according to the most recent NAHB/Wells Fargo Housing Market Index (HMI).

“Builders’ sentiment has gradually cooled since the housing market index hit a record high of 90 last November,” said NAHB Chairman Chuck Fowke. “September data shows stability as the cost of some building materials decreases, especially for softwoods.”

NAHB chief economist, Robert Dietz, added: “The single-family home market has moved away from the unsustainably high construction pace of last fall and has reached a still warm but more stable level of activity, as reflected in September’s HMI.”

NAHB said it expects housing affordability to be a major demand challenge in the coming quarters, given the rapid growth rate in home prices and construction costs over the past year.

“Regionally, we continue to see growth in the south and west, particularly in the west of the mountains,” Dietz said. “Suburban markets have expanded the most over the past year, although inner cities are now accelerating, with townhouse construction having its 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 builders’ 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 potential buyer traffic as “high to very high,” “medium,” or “low to very low.” The scores for each part are used to calculate a seasonally adjusted index, with any number above 50 indicating that more builders view the conditions as good than bad.

According to NAHB, the HMI index measuring current sales conditions rose to 82. The component measuring potential buyer traffic gained two points to 61 and the meter charting sales expectations over the next six months remained stable at 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 72, the South two points to 80, and the West registered a two-point drop to 83. The Midwest was unchanged at 68.

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