Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The three-point rise brought the index to its highest point since June 2006.
"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," noted NAHB chief economist David Crowe. "However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags."
Derived from a monthly survey that NAHB has been conducting for the past 25 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 from each component are then used to calculate a seasonally adjusted index where any number higher than 50 indicates that more builders view sales conditions as good than poor.
All three HMI components posted gains in September. While the component gauging current sales conditions increased four points to 42, the component gauging sales prospects in the next six months rose eight points to 51, and the component measuring traffic of prospective buyers edged up one point to 31.
Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest and West each registered five-point gains, to 40 and 43, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30.