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NAHB: Builder Confidence Wanes Somewhat in September

by Peter Thomas Ricci

Builder confidence had been on a tear recently, but new data from the NAHB suggests a cooling off period.

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Builder confidence for the newly built, single-family home market stumbled a bit in October, with the National Association of Home Builders’ (NAHB) Housing Market Index falling two points from September to a reading of 55.

That comes after a number of months of positive readings for the Housing Market Index, and signifies that though builder confidence is still in positive territory, it could be entering a slowdown.

Housing Market Index in October

Derived from a monthly survey that the NAHB has been conducting for 25 years, the Housing Market Index gauges builder perceptions on several facets of the new single-family home market, with any number over 50 indicating that more builders view conditions as good than poor. October’s readings included:

  • All three of the Housing Market Index’s components declined two points in October.
  • The component gauging current sales conditions fell to 58; the component gauging sales expectations in the next six months posted a reading of 62; and the component gauging traffic of prospective buyers was 44.
  • In addition, the index also computed three-month moving averages for the nation’s regions: the South held steady at 56;, the West declined a single point to 60; the Northeast fell three points to 38; and best of all, the Midwest posted a one-point gain to 64.

Interestingly, that one point increase for the Midwest is consistent with the sentiments of Tom Krettler, a broker with RE/MAX Unlimited Northwest and a past president of the Mainstreet Organization of Realtors.

Because inventory remains low in Chicagoland, Krettler said, homebuilders will fill that void with new construction properties (particularly in the northwest suburbs), and he has revised his 2014 business plan to include new construction for that reason.

“Once the inventory is favorable, that’s when builders start to jump in,” he said.

Interested in how the Housing Market Index has progressed the last year? Check out our sweet graph below for an idea:

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