NAHB Study Shows Builder Confidence Continues to Gain Momentum in September

Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 points on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released earlier this week. This latest three-point gain brings the index to its highest reading since June of 2006.

NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla., said in a press release announcing the results, “This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there's still a long way to go on the road to recovery and several obstacles are slowing our progress. In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work — which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

“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,” said NAHB Chief Economist David Crowe in that release. “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 over 50 points 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 points, the component gauging sales prospects in the next six months rose eight points to 51 points and the component measuring traffic of prospective buyers edged up one point to 31 points. 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 points and 43 points, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30 points.