The National Association of Home Builders and Wells Fargo today reported a surge in builder confidence in the real estate market in October.

The builders’ group, in a monthly survey of home builders, asks builders to rate current sales of single-family homes, prospects for sales activity in the next six months, and traffic of prospective buyers. Scores from the survey are used to calculate a seasonally adjusted index, the Housing Market Index. In this index, any number above 50 indicates that more builders view sales conditions as good while fewer builders view sales conditions as poor.

Builder confidence in current sales activity reached 78 in October, a five-point gain over the September index. Builder confidence in expected sales over the next six months reached 84, up nine points since September. And the traffic of prospective buyers rose to 54, or two points higher than the September index. The index for builder confidence in current single-family home sales and future single-family home sales over the next six months were at a record high for the year, while the index measuring traffic of prospective buyers was down from a high of 56 in August. And the overall index of 72 for October 2004 equaled its October 2003 level.

“Rates on long-term mortgages have averaged well below 6 percent for many weeks now, and adjustable-rate loans have been around 4 percent – providing a powerful incentive to buy a home,” said Bobby Rayburn, NAHB president and a home and apartment builder from Jackson, Miss.

“Another factor that’s undeniably contributing to builder optimism is the large turnout of prospective buyers at model homes and sales offices,” said David Seiders, chief economist for the association. “The HMI component gauging traffic of prospective buyers has remained above 50 since May, which is a strong run for that index and a positive sign for potential sales activity.”

“We’re headed for another record year for new-home sales in 2004, and the long-term outlook is still very encouraging,” said Seiders. “Most builders are looking forward to a healthy marketplace moving into 2005.”

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