• Confidence among new home builders is the best in a decade.
  • All four regions of the country showed confidence gains.
  • Labor and land shortages continue to weigh on optimism.

According to new data released by the influential National Association of Home Builders, its members are feeling good about the market for new homes in the U.S. In the Northeast specifically, confidence has increased annually and monthly. 

The NAHB/Wells Fargo Housing Market Index, the critical measure of builder confidence in the market for freshly constructed single-family homes, rose to a seasonally adjusted 64 for October. That’s the highest it’s been since November 2005.

The index has remained over the critical measure of 50, the benchmark for a positive reading, since July 2014. September’s number matched August’s reading of 61, which was one better than July’s 60.

The NAHB has surveyed builders for this data for three decades.

The good news is that positivity about new homes means that grief about the state of other economies around the globe is not playing a role in how builders see their own financial futures. In the U.S., five years of job growth, along with low mortgage interest rates, has continued to coax potential home buyers from the sidelines. Stagnant wages, though, have made it more challenging to save a downpayment.

The bad news? The consistent conversation about domestic interest rates ticking upward is dampening unbridled enthusiasm. While the Fed may stay on the fence for the time being, the chatter about that key component of home ownership continues to cloud the horizon going forward. And, NAHB Chairman Tom Wood continued to underscore shortages in two critical ingredients for new home building: construction workers and buildable land.

“The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” said Woods, a home builder from Blue Springs, Missouri, in a prepared statement. “However, our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor.”

According to the NAHB, the index is calculated by gauging builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index.

“The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” — NAHB Chairman Tom Woods

In the Northeast, the index rose from 41 in October of last year to 47 this year. This is the highest marking that has been posted in the Northeast for the past year, matching January and August confidence.

Two of the index’s three components posted gains in October. The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70. The index charting buyer traffic held steady at 47.

All four regions of the country posted gains in the three-month moving averages for their region. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively.

Email Kimberley Sirk

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