The NAHB/Wells Fargo Housing Market Index rose by six points to 78 in August. This marks the second time in the survey’s 35-year history that the index has reached this level, matching the all-time builder confidence record set in December 1998.
The NAHB/Wells Fargo HMI gauges builders’ perceptions of current single-family home sales, sales expectations for the next six months, and traffic of prospective buyers. The scores for each component form the main seasonally adjusted index, where any number over 50 indicates a majority of builders have positive views of industry conditions.
“Housing has clearly been a bright spot during the pandemic, and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020,” says NAHB chief economist Robert Dietz. “Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs, and rural markets as renters and buyers seek out more affordable, lower-density markets.”
The HMI index gauging current sales conditions rose by six points to 84 for August. The index for sales expectations for the next six months rose three points to 78, and the index measuring prospective buyer traffic rose eight points to 65, the highest rating ever recorded for this metric.
The three-month moving average regional HMI score for the Northeast rose by 20 points to 65. At the same time, the Midwest rose 13 points to 63, the South rose by 12 points to 71, and the West rose by 15 points to 78.
“The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs as measured on the HMI,” says NAHB chairman Chuck Fowke, a custom home builder from Tampa, Fla. “However, the V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April. Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”