Builder confidence reaches another high

Home builder sentiment for new single-family construction continues to surge.

Builder confidence in the market for newly-built single-family homes increased two points to 85 in October while surpassing the previous all-time high of 83 recorded in September, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). 

The consecutive high-water marks are the first two months the index has ever been above 80, the NAHB said.

Low mortgage rates, an urban exit from major metro markets, and low housing supplies are helping fuel a strong housing market. The current market sits at a 3.3 month supply.

Sales of new single-family homes in August increased 4.8% to an annual rate of 1.01 million units — the highest pace since September 2006.

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, the NAHB reported.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased six points to 82, the Midwest increased three points to 75, the South rose three points to 82 and the West increased five points to 90.