Could Home Builders Be Any More Confident?

A monthly index of builders’ attitudes hit 85 this month – a new high after a record-breaking 83 in Sept. The index goes from 1 to 100; anything over 50 is optimistic.

WASHINGTON – The National Association of Home Builders (NAHB) said Monday that builder confidence in the market for newly built single-family homes in October surpassed last month’s record high.

Builder confidence increased two points to 85 in October, surpassing the previous all-time high of 83 reported in September amid low interest rates, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.

“These are the first two months the index has ever been above 80,” the NAHB statement said.

“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,” NAHB Chairman Chuck Fowke, a builder from Tampa, Fla., said. “However, it is becoming increasingly challenging to build affordable homes as shortages of lots, labor, lumber and other key building materials are lengthening construction times.”

Housing has rebounded quickly from an April slump, according to an earlier NAHB statement, with a suburban shift for residential construction amid large metros’ susceptibility to risk posed by higher density areas due to the COVID-19 pandemic.

Furthermore, an NAHB analysis last week showed new home sales outpacing construction starts by a historic margin, indicating additional home building in the future. New home sales are signed sales contacts for new builds and construction starts are the beginning of construction of homes.

The index is derived from a monthly survey that the NAHB has conducted for 35 years, which gauges builders’ perceptions of current single-family homes sales and sales expectations for the next six months as “good,” “fair” or “poor.”

Any number in the index over 50 indicates that more builders view conditions as good than poor.

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