Builder Confidence Remains Solid in October

In an article recently published by the National Association of Home Builders (NAHB), it was reported that the market for newly constructed single-family homes remained consistent in the month of October. The builder confidence level was measured at 63 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which is just two points down from September and still considered a very solid level.

It’s great news for the residential housing market to see steady reports of positive builder confidence levels. In fact, even with the two-point drop, October’s measurement represents the second-highest level in 2016. According to NAHB Chairman, Ed Brady from Bloomington, Illinois, it’s a “sign that the housing recovery continues to make solid progress.”

So where exactly does this HMI report get its findings? The report is gathered via a monthly survey conducted by the NAHB. Having gathered these for about 30 years, these reports are used to gauge builder perceptions of the single-family home sales market in addition to rating traffic of prospective buyers. Any score over 50 is considered good, and the higher the number, the better it is for the housing industry.

There are multiple components that make up the HMI report, including the builder confidence level. Two other HMI measurements showed a slight loss. The component that gauges current sales conditions also fell two points to 69, while the index that charts buyer traffic dropped one point to 46. However, the index that measures sales expectations for the next six months gained a point. It measured at 72 in October.

The HMI also tracks three-month moving averages across different regions of the United States. All four regions saw gains. The South (65), Midwest (56) and Northeast (43) all gained one point and the West increased two points for a measure of 75.

“The October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains,” says NAHB Chief Economist, Robert Dietz. “Moreover, mortgage rates remain low and the HMI index measuring future sales expectations has been over 70 for the past two months. These factors will sustain continued growth in the single-family market for the months ahead.”

At QuickDraw Fund Control, we are very encouraged by the HMI indexes over these past two months. We’re actively providing services to many single and multi-family home construction and renovation projects, so it’s important to keep our fingers on the pulse of the residential real estate market, in order to best protect the assets of the lenders we work with every day. When we hear about positive HMI indexes, it is good news for everyone!

October 7, 2016
QuickDraw Fund Control