Builders Have Historically High Confidence in Housing Market

Reflecting a strong market and low interest rates, builder confidence in the housing market remained high though slightly lower this month, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released Tuesday.

Builder confidence dropped a point in February to 74, a number reflects nearly historically high confidence in the housing market.

“Steady job growth, rising wages and low interest rates are fueling demand but builders are still grappling with increasing construction and development costs,” NAHB Chairman Dean Mon said in a news release.

The NAHB/Wells Fargo HMI measures builder perceptions of current single-family home sales and expectations for sales over the next six months as “good,” “fair” or “poor.” Any number over 50 indicates that more builders view conditions as “good” than “poor.”

The HMI has been above 70 since October of last year – the longest since streak since 1998-99, when it was above 70 for 16 consecutive months. The HMI reached a low of 8 in January 2009. See full historical tables here.

More details from the February report include:

  • The HMI index gauging current sales conditions fell one point to 80.
  • The component measuring sales expectations in the next six months was one point lower at 79.
  • The gauge charting traffic of prospective buyers also decreased one point to 57.
  • Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 63, the Midwest increased one point to 67 and the South moved two points higher to 78. The West fell one point to 83.

“At a time when demand is on the rise, regulatory constraints along with a shortage of construction workers and a dearth of lots are hindering the production of affordable housing in local communities across the nation,” NAHB Chief Economist Robert Dietz said. “And while lower mortgage rates have improved housing affordability in recent months, accelerating price growth due to limited inventory may offset some of that effect.”