The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) moved one point higher this month. However, at 66, NAHB's measure of builder confidence in the new home market stayed within the 64 to 66 range where it has been now for four months.
"While 30-year mortgage rates have dropped from 4.1 percent down to 3.6 percent during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns," said NAHB Chief Economist Robert Dietz. "Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes."
The HMI is derived from a survey of its new home builder members that NAHB has conducted monthly for more than 30 years. Respondents are asked for their perceptions of both current single-family home sales and their expectation for those sales six months out, ranking them as "good," "fair" or "poor." Builders are also asked 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.
The HMI index gauging current sales conditions increased two points to 73 and the component measuring traffic of prospective buyers also rose two points to 50. The measure charting sales expectations in the next six months fell one point to 70.
NAHB chair Greg Ugalde said, "Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots."
Looking at the three-month moving averages for regional HMI scores, indices in the South, West, and Midwest each increased one point to 69, 73 and 57 respectively. The Northeast fell three points to 57.