Real Estate

Homebuilder sentiment hits 62 in September, highest since 2005

Home builder sentiment rises in September

Builder confidence in the nation's housing market continued its careful climb higher in September. A monthly sentiment index (HMI) from the National Association of Home Builders (NAHB) rose one point to a level of 62, the highest since the end of 2005.

The index has been above 50, the line between positive and negative, since July 2014.

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Daniel Acker | Bloomberg | Getty Images

"The HMI shows that single-family housing is making solid progress," said NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri, in a release. "However, our members continue to tell us that they are concerned about the availability of lots and labor."

The index was not entirely positive, though. Of its three components, current sales conditions rose one point to 67, but sales expectations over the next six months fell two points to 68. The component measuring buyer traffic did rise two points to 47, but is still in negative territory.

Another index gauging homebuyer traffic, from Credit Suisse, showed a decline in August, "indicating relatively softer trends in the markets most important for builders."

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Real estate agents have reported growing price fatigue among potential buyers. The premium for new construction compared to existing homes is currently wider than usual. Homebuilders have been able to raise prices more because there is such short supply of all homes available for sale.

Single family housing starts rose an impressive 12.8 percent in July from June, according to the U.S. Census. Building permits, however, an indicator of future construction, fell 1.9 percent.

Potential homebuyers exit an open house in Redondo Beach, California.
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"NAHB is projecting about 1.1 million total housing starts this year," said NAHB Chief Economist David Crowe, referring to both single and multi-family construction. "Today's report is consistent with our forecast, and barring any unexpected jolts, we expect housing to keep moving forward at a steady, modest rate through the end of the year."

Looking regionally, on a three-month moving average, home builder confidence rose one point in both the West and Midwest to 64 and 59, respectively. The South posted a one-point gain to 64, and builder confidence in the Northeast dropped one point to 46.

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