Following four consecutive months of improvement, builder confidence in the market for newly built, single-family homes held unchanged in September with a reading of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). All four regions posted gains in their three-month moving average HMI scores in September, including a two-point gain to 41 in the Northeast, a four-point gain to 64 in the Midwest, a two-point gain to 56 in the South and a four-point gain to 61 in the West, respectively.
"Following a solid run up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue," said NAHB Chief Economist David Crowe.
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations in 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 from 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.
"While builder confidence is holding at the highest level in nearly eight years, many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "Homebuyers are adjusting to the fact that, while mortgage rates are still quite favorable on a historic basis, the record lows are probably a thing of the past."
HMI component indexes were mixed in September. While the component gauging current sales conditions held unchanged at 62, the component gauging sales expectations in the next six months declined three points to 65 and the component gauging traffic of prospective buyers increased one point, to 47.