Home builders’ exceptional summer isn’t over yet. A monthly housing market gauge measuring builder confidence has hit its highest point in 35 years, the National Association of Home Builders, or NAHB, reported Wednesday.
The NAHB/Wells Fargo Housing Market Index rose to a reading of 83 in September, the trade organization said, surpassing a previous record of 78. All three components of the survey—which measure builder perceptions of current sales conditions, sales expectations over the next six months, and traffic of prospective buyers—reached new highs amid historic traffic fueled by low interest rates and migration trends, the trade group said in a release.
Like many housing indicators this year, the confidence index has been on a wild ride. As the coronavirus pandemic thrust the industry into uncertainty, confidence plunged to a reading of 30 in April from 72 in March, the most dramatic one-month percentage drop in sentiment in the survey’s history. Builders remained unsure in May, reporting an index reading of 37, but grew more confident in June, with an index reading of 58. Readings above 50 represent a positive view of conditions, the group says.
By August, the index came in on the verge of a record, registering a reading of 78 that tied a previous high set in 1998. Economists polled by FactSet expected more of the same in September, with a consensus estimate of 78.
In a release, NAHB chief economist
said builders are benefiting from high traffic, but warned about the rising cost of lumber. “Lumber prices are now up more than 170 percent since mid-April, adding more than $16,000 to the price of a typical new single-family home,” Dietz said. “The suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates.”
Home builder stocks perked up on the news. The
SPDR S&P home builders ETF
(XHB), an exchange-traded fund that tracks home builders and related industries, rose 1.8% near midday Wednesday. The
was up 0.4%, while the
Dow Jones Industrial Average
was up 0.7%.
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