Builders have tied their 32-year old record for confidence
as measured by the National
Association of Home Builders/Wells Fargo Housing Market Index (HMI). The Index,
which has been conducted by NAHB for 35 years, jumped by 6 points in August to
78 and is also 6 points higher than it was in March, before the COVID-19
pandemic shut down some construction sites and shut in much of the buying
public. The last time the HMI was this high was in December 1988. Builders also
set a survey high with their perceptions of buyer traffic.
Derived from a monthly survey that
NAHB has been conducting for 30 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 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 gains in
August. The HMI index gauging current sales conditions rose six points to 84,
the component measuring sales expectations in the next six months increased
three points to 78 and the measure charting traffic of prospective buyers
posted an eight-point gain to reach its highest level ever at 65.
economist Robert Dietz said the August reading is a sign that housing continues
to lead the economy forward. The demand for new single-family homes continues
to be strong, he said, and low interest rates and a focus on the importance of
housing has stoked buyer traffic to all-time highs as measured on the HMI.
Single-family construction is also benefiting from a noticeable shift in
housing demand to suburbs, exurbs and rural markets as renters and buyers seek
out more affordable, lower density markets. He cautioned, however, that a “staggering
increase” in lumber prices, which have more than doubled since
mid-April, could dampen momentum in the housing market this fall.
Looking at the three-month moving
averages for regional HMI scores, the Northeast jumped 20 points to 65, the
Midwest increased 13 points to 63, the South rose 12 points to 71 and the West
increased 15 points to 78.