Builder Confidence Stabilizes In October

Breaking a string of eight consecutive monthly declines, the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which gauges builder sentiment in the single-family housing market, posted a modest one-point gain to stabilize at a level of 31 in October. Any number over 50 indicates that more builders view sales conditions as good than poor.

“While the index remains at a low level, the single-point increase from September’s reading suggests that builder attitudes for new-home sales may be stabilizing,” said David Seiders, chief economist, National Association of Home Builders (NAHB), Washington, D.C. “This is attributable to several key economic factors. Mortgage interest rates have fallen substantially from their summer highs, energy prices have dropped dramatically from their recent peaks, consumer sentiment has posted a strong rebound and the job market is doing reasonably well.”

“More than three out of four builders are offering substantial sales incentives to move their product and limit cancellations, and this aggressive strategy is working — making this an opportune time for home buyers to enter the market,” said NAHB President David Pressly, a home builder from Statesville, N.C. “The market correction appears to be approaching the bottom in terms of sales volume, and we expect the supply-demand balance to improve considerably before long.”

NAHB has conducted the HMI Index for 21 years. In addition to using the NAHB/Wells Fargo Housing Market Index as an indicator of builder confidence in current market conditions, the homebuilding industry and investment community rely on the index as a leading indicator of future sales.