For only the second time in its 35-year history, the
National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index
(HMI) topped 80 this month. The first time was in September. The index, a
measure of builder confidence in the market for newly built single-family homes
increased two points to 85, breaking the previous high of 83 set last month.
“Traffic remains high and record-low interest rates are keeping demand
strong as the concept of ‘home’ has taken on renewed importance for work, study
and other purposes in the Covid era,” said NAHB Chairman Chuck Fowke. “However,
it is becoming increasingly challenging to build affordable homes as shortages
of lots, labor, lumber and other key building materials are lengthening
Derived from a monthly survey of its new home builder members, the HMI 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 for each component are then used to
calculate a seasonally adjusted index where any number over 50 indicates that
more builders view conditions as good than poor.
All the HMI indices posted or matched their highest readings ever in
October. The HMI index gauging current sales conditions rose two points to 90,
the component measuring sales expectations in the next six months increased
three points to 88 and the measure charting traffic of prospective buyers held
steady at 74.
In addition to setting new highs, the HMI has carried out a stunning
comeback from its April level after a 42 point plunge. The index had recovered
enough by August to set an all-time high, one that has subsequently been broken
“The housing market continues to be a bright spot for the economy, supported
by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB
Chief Economist Robert Dietz. “NAHB analysis published last week showed that
new single-family home sales are outpacing starts by a historic margin.
Bridging this gap will require either a gain in construction volume or
reductions in available inventory, which is already at a historic low in terms
of month’s supply.”
Regional scores are reported as three-month moving averages. The index in
the Northeast increased 6 points to 82, the Midwest and the South each gained 3
points to 75 and 82, respectively and the West rose by 5 points to 90.