Builder confidence soars in June

Builder confidence is back and showing signs that housing is read to lead the economy out of the shadows of the COVID-19 crisis.

In the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence jumped 21 points to 58 in June. Readings above 50 on the HMI indicate a positive market, according to the NAHB.

With much of the nation reopening from government-imposed COVID-19 restrictions, housing inventory is tight while mortgage applications are increasing due to low interest rates. 

The NAHB said that buyer traffic has seen strong growth in the last month while builders are reporting increasing demand for families seeking single-family homes in inner and other suburbs.

"As the nation reopens, housing is well-positioned to lead the economy forward,” said NAHB Chairman Dean Mon. “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”

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 June. The HMI index gauging current sales conditions jumped 21 points to 63, the component measuring sales expectations in the next six months surged 22 points to 68 and the measure charting traffic of prospective buyers vaulted 22 points to 43.

“Housing clearly shows signs of momentum as challenges and opportunities exist in the single-family market,” said NAHB Chief Economist Robert Dietz. “Builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower density neighborhoods. At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market.”

Looking at the monthly average regional HMI scores, the Northeast surged 31 points to 48, the South jumped 20 points to 62, the Midwest posted a 19-point gain to 51 and the West catapulted 22 points to 66.

The latest HMI tables can be found at nahb.org/hmi.