September Builder Confidence Holds Steady

Growing affordability concerns couldn't keep builder confidence down for single-family homes as the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) held steady throughout September. The index maintained a 67 reading, indicating "firm demand for housing" from Millennials and new homebuyers.

According to NAHB Chairman Randy Noel, the decline in lumber prices was an added bonus for summer construction projects. Noel said in a Sept. 18 press release that builders are still navigating how to stay competitive in a market with fluctuating construction material costs. The HMI not only measures builders current single-family home sales, but also explores sales expectations six months ahead. When the score is over 50, conditions are good.

"A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward," added NAHB Chief Economist Robert Dietz. "However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising."

Economists are anticipating interest rate hikes this month and again in December as well as two more in 2019, Reuters reported earlier this week. The predicted quarter-point hike in September would bring interest rates between 2% and 2.25%.

"Clearly the odds [of] rate hikes are increasing," Alex Manzara, vice president at R.J. O'Brien and Associates in Chicago, told Reuters. "Sentiments are pretty bearish on rate hikes."

—Andrew Michaels, editorial associate 

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Sunday, 19 January 2020

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