September Homebuilder Confidence Remains Solid, Lumber Prices Pull Back

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The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for September remained unchanged month over month with a reading of 67. Economists polled by Bloomberg were expecting an index reading of 67. The HMI posted an 18-year high of 74 in December 2017.

Builders continue reporting solid demand for new homes. Lumber prices have eased recently, but rising costs continue to be a problem as the labor market for construction workers remains tight.

The index is based on an NAHB monthly survey of homebuilder perceptions of current single-family home sales and expectations for sale in the next six months. An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions subindex for September rose by a point to 74 and the subindex that estimates prospective buyer traffic was unchanged at 49. The subindex measuring sales expectations for the next six months increased from 72 to 74.

The NAHB noted:

A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward. However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising. We nonetheless expect some market disruption effects due to the impact of Hurricane Florence. Single-family construction in North Carolina, South Carolina and Virginia makes up 12% of national production.

In the NAHB’s regions, three-month moving average indexes dipped in two of four regions. The Northeast index score rose one point to 54. Index scores in the South remained unchanged at 70 while scores dropped one point to 73 in the West and three points to 59 in the Midwest.