U.S. homebuilders are loving today's lower mortgage rates, which are bringing buyers back and boosting sales.
Builder confidence in the single-family market jumped 3 points in October to 71 on the National Association of Home Builders/Wells Fargo Housing Market Index, or HMI. That is the highest level since February 2018 and up from 68 in October of last year. Anything above 50 is considered positive sentiment.
"The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth and a reduction in new home inventory," said NAHB Chairman Greg Ugalde, a homebuilder from Torrington, Connecticut.
Of the index's three components, current sales conditions rose 3 points to 78, sales expectations over the next six months jumped 6 points to 76 and buyer traffic rose 4 points to 54.
"The second half of 2019 has seen steady gains in single-family construction, and this is mirrored by the gradual uptick in builder sentiment over the past few months," said Robert Dietz, chief economist at the NAHB. "However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy."
Sentiment may be high, but single-family housing starts are rising very slowly. Builders continue to point to higher costs for land, labor, materials and especially regulatory compliance for their slow production as well as for their focus on the move-up and luxury markets. Housing supply is incredibly low, especially at the entry level, and builders are not doing much to replenish that inventory.
Regionally, on a three-month moving average, builder sentiment in the Northeast posted a 1-point gain to 60. It was also up 1 point to 58 in the Midwest, and in the South it increased 3 points to 73. The West region also saw a 3-point gain to 78.