NAHB: Builder Confidence Hits Highest Point Since November 2005

Builder confidence in the market for newly built, single-family homes rose in September to reach the highest point since November 2005, the National Association of Home Builders (NAHB) reports.

‘Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,’ says Kevin Kelly, chairman of the NAHB and a home builder and developer from Wilmington, Del., in a release.

Builder confidence reached a score of 59 on the NAHB/Wells Fargo Housing Market Index (HMI) in September. It was the fourth consecutive month that home builder confidence improved.

However, David Crowe, chief economist for the NAHB, points out that there is a serious disconnect between builder sentiment and consumer sentiment.

‘While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers,’ Crowe says. ‘Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.’

A recent report from the Mortgage Bankers Association (MBA) shows that applications for new home purchases fell 9% in August compared to July, on an unadjusted basis.

What's more, the most recent data from the U.S. Census Bureau and the Department of Housing and Urban Development show that sales of new single-family homes in July fell to a seasonally adjusted annual rate of about 412,000 – about 2.4% below the revised June rate of 422,000 – this following an 8.1% drop in new home sales in June.

Aside from newly built, single-family homes, another reason that builder confidence could be rising is the strength of the multifamily housing market. In August, the Census Bureau reported that housing starts jumped in July to reach the highest level in eight months – most of it driven by increased construction of apartment buildings. The annual rate for units in buildings with five units or more was 423,000 units – up nearly 33% from 318,000 units in June. Meanwhile, single-family housing starts in July were at an annual rate of 656,000 units – up about 8% from 606,000 units in June.


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