Rising demand for new homes drives builder confidence

An index of builder confidence in the new single-family home market rose four points in August

Rising demand for new homes drives builder confidence
Builders are more confident in the newly-built single-family home market in August than they were in July, according to the Housing Market Index released by the National Association of Home Builders (NAHB) and Wells Fargo.

The index rose to a level of 68 during the month, an increase of four points.

“Our members are encouraged by rising demand in the new-home market,” said NAHB Chairman Granger MacDonald. “This is due to ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.”

“The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market,” said NAHB Chief Economist Robert Dietz. “GDP growth improved in the second quarter, which helped sustain housing demand. However, builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.”

The three components of the index saw gains during the month. The measure of current sales conditions increased four points to 74 and the component gauging sales expectations in the next six months climbed five points to 78. The index charting buyer traffic rose by one point to 49.

In terms of regional index scores, the Northeast posted a one point increase to 48 on the basis of the three-month moving average. Scores were unchanged for the West, South, and Midwest regions at 75, 67, and 66, respectively.

The seasonally adjusted index is calculated based on a monthly survey that looks at builder perceptions on 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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