Builder Confidence Breaks Previous 35 Year Record High

Dated: October 20 2020

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The National Association of Home Builders and Wells Fargo Housing Market Index rose two points to 85 in October – the highest score the series has ever recorded since its inception 35 years ago and the second month in its history the score broke 80. Based on a scale from zero to 100, the index gauges builder perceptions of current single-family home sales and sales expectations for the coming six months.


In October, all HMI indices, including current sales conditions, sales expectations and traffic of prospective buyers either matched or climbed above their previously highest readings ever, the release said.


Regionally, the West showed the greatest promise, with confidence in the three-month moving averages jumping up five points to 90. The Northeast climbed six points and the South rose three with the regions both matching a score of 82. The Midwest also increased three points to 75, however, regional confidence gains slowed for the second month in a row since August’s double-digit spikes.


According to NAHB chairman Chuck Fowke, traffic remains high while record low interest rates are keeping demand strong as the concept of home takes on renewed importance for work and study.


“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,” Fowke said.


A Friday report from NAHB revealed lumber prices have soared 120% since mid-April, but are down 20% since mid-September.


Because of the spike over the last several months, the Bureau of Labor Statistics estimates roughly $16,000 has been added to the price of a typical new single-family home. That sentiment is further evidenced by recent Redfin data that revealed the national median home price rose 14.4% year over year in September – the largest annual increase since at least 2012.


Despite rising home prices, NAHB chief economist Robert Dietz said the housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns.

The real test will be keeping up with volume.


“NAHB analysis published last week showed that new single-family home sales are outpacing starts by a historic margin,” Dietz said. “Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of month’s supply.”


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Mark Ross

For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 25+ years in the industry, Mark has gained experience in....

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