Homebuilder Sentiment Defies Endless Recession Calls by the Media

The National Association of Home Builders has released its latest Housing Market Index (HMI), with a reading of 68 for September. That is a high in 2019, higher than the 67 reading from August and the 65 from July, as well as higher than the 67 from September of 2018.

Econoday had published a consensus estimate for builder sentiment to drop to 66 rather than rise in September, and the report is after August’s preliminary reading of 66 was revised up to 67.

While the association is expected to be pro-housing, this reflects very strong current single-family sales and a strong single-family sales in the coming six months. While the sub-reading of “traffic of prospective buyers” was flat at 50 in September (versus August), that is a tie for the highest level of 2019 and is still a point higher than it was in September of 2018.

It is easy to assume that low interest rates are helping builders be more confident. That said, the media has been throwing around “recession” in its headlines and communications so much that some people probably thought the United States was already in a recession. There was still the pesky trade concerns noted in the commentary, but that is to be expected at this point.

As for the expansion versus contraction, levels above 50 represent expansion. According to the NAHB website:

The HMI is a weighted average of separate diffusion indices for these three key single-family series. The first two series are rated on a scale of Good, Fair and Poor and the last is rated on a scale of High/Very High, Average, and Low/Very Low.

Despite the overall market indexes remaining lower, the iShares U.S. Home Construction ETF (ITB) was last seen trading up $0.12 at $42.15, in a 52-week range of $28.25 to $42.73. The SPDR S&P Homebuilders ETF (NYSEARCA: XHB) was last seen trading down three cents at $43.27, and it has a 52-week range of $30.56 to $44.04.

That iShares ETF is up about 39% so far in 2019, compared with about 33% for the SPDR ETF. The year-to-date gain in the S&P 500 is about 20%.

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