Builder confidence in the market for newly built single-family homes rebounded by a couple of points in October to the same level at which it was gauged prior to hurricanes Katrina and Rita, according to the National Association of Home Builders/Wells Fargo Housing Market Index released today.
“This is a reassuring sign that builder attitudes are bouncing back from the initial shock of the hurricanes’ devastation and the economic uncertainties immediately following those storms, even in the midst of higher mortgage interest rates,” said NAHB President Dave Wilson, a custom home builder from Ketchum, Idaho.
“At the same time, the fact that the confidence level remains below the mid-year high may indicate that builders see the market finally beginning to plateau at a slightly slower, but quite healthy, pace,” noted NAHB’s chief economist, David Seiders.
The index increased two points to 67 in October, returning to the same level it hit in August but still off the year’s cyclical high of 72, set this June. The gain marks an end to a three-month trend of downward movements.
Derived from a monthly survey that NAHB has been conducting for approximately 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “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 sales conditions as good than poor.
Each of the component indexes of the index registered small gains in October. The indexes for current single-family sales and traffic of prospective buyers both edged up a single point, to 73 and 50, respectively, while the index gauging sales expectations in the next six months rose two points to 72. Sales expectations had deteriorated substantially in the September index.
Regionally, builders in the West continue to report vigorous activity in their markets, with a remarkable seven-point gain in their confidence level (to 90) in October. Meanwhile, builders in the Midwest and South posted two- and three-point gains in their confidence levels, to 44 and 74, respectively, while the Northeast was the only place where builder confidence fell this month (by two points, to 66).
NAHB is a Washington-based trade association representing more than 220,000 members involved in all aspects of home building.
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