Builder confidence rebounds in October

While confidence is up, builders still face hurricane-related material-price hikes and labor shortages

Builder confidence rebounds in October
Confidence among builders in the market for newly built single-family homes recovered in October as they overcame initial reactions from recent hurricanes, according to the Housing Market Index (HMI) released by the National Association of Home Builders (NAHB) and Wells Fargo.

The HMI was 68 in October, an increase of four points from the previous month to the highest level since May.

“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” NAHB Chairman Granger MacDonald said. “However, builders need to be mindful of long-term repercussions from the storms, such as intensified material-price increases and labor shortages.” 

“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” NAHB Chief Economist Robert Dietz said. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new-home market continue to strengthen at a modest rate in the months ahead.”

The three components of the HMI all increased during the month. There was a five-point increase in the component gauging current sales conditions to 75, while the index charting sales expectations in the next six months increased five points to 78. The component measuring buyer traffic nudged up to 48 by a single point.

The three-month moving average for the HMI in the South region increased two points to 68 while the Northeast region recorded a one-point increase to 50. Average HMI scores in the West and Midwest regions were steady at 77 and 63, respectively.

The seasonally adjusted index is calculated based on a monthly survey that looks at builder perceptions of single-family homes sales, sales expectations for the next six months, and the traffic of prospective buyers. An index level above 50 shows more builders think conditions are good than poor.

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