Builder Confidence Survey Rises to Pre-Pandemic Levels

The NAHB/Wells Fargo index is derived from a monthly survey of builders that gauges sales expectations and traffic of prospective buyers.

WASHINGTON, D.C. — Builder confidence in the market for newly-built single-family homes rose 14 points to 72 this month, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

The HMI now stands at the solid pre-pandemic reading in March before the outbreak effected much of the nation, sending a strong signal that the housing market is ready to lead a post-coronavirus economic recovery, according to NAHB.

“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” states NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”

Although the housing is showing signs of recovery, challenges persist, explains NAHB Chief Economist Robert Dietz.

“Lumber prices are at a two-year high, and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist. Nonetheless, the important story of the changing geography of housing demand is benefiting new construction,” Dietz says. “New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”

The NAHB/Wells Fargo Housing Market Index gauges 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 where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted gains in July. The HMI index gauging current sales conditions jumped 16 points to 79, the component measuring sales expectations in the next six months rose seven points to 75 and the measure charting traffic of prospective buyers posted a 15-point gain to 58.

Looking at the monthly average regional HMI scores, the Northeast surged 22 point to 70, the Midwest jumped 18 points to 68, the South increased 10 points to 73 and the West increased 14 points to 80.

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