Home builders' confidence at highest level in 8 years
The National Association of Home Builders/Wells Fargo housing-market index remained at 58 in September. Readings above 50 signal that builders generally are optimistic about sales trends. In the bubble year of 2005, the sentiment gauge hit an average reading of 67.
“Following a solid run-up in builder confidence in the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the head winds of tight credit, shrinking supplies of lots for development and increasing labor costs continue,” said David Crowe, NAHB’s chief economist.
“In short, the index continues to show net strengthening. ... The message is that other factors are more than offsetting higher mortgage rates,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “Meanwhile, in level terms, mortgage rates are still low.”
But builders’ attitudes seem resilient. Markets watch builder-sentiment readings to get a feeling for the health of housing. The overall sentiment level among builders has increased 45 percent in the past year, far outpacing construction growth. On Wednesday, the government will report on new home construction, and economists expect to see a seasonally adjusted annual starts rate of 921,000 in August, which would be up 23 percent from the year-earlier period.
Meanwhile, a gauge of prospective-buyer traffic ticked up to 47 from 46 in August, and a component measuring sales expectations fell to 65 from 68.
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