Homebuilder sentiment unexpectedly rises amid solid demand

Register now

Confidence among homebuilders unexpectedly rose in October, registering the first gain in five months amid falling lumber prices and solid demand, according to a report Tuesday from the National Association of Home Builders/Wells Fargo.

The Housing Market Index increased 1 point to 68 (the estimate was 66). The current sales gauge for single-family homes increased to 74 from 73; the gauge of the six-month sales outlook rose to a three-month high of 75 from 74. The measure of prospective buyer traffic climbed to a seven-month high of 53 from 49.

October's pickup in sentiment across the three subindexes and all four regions indicates the market for newly built homes may be regaining steam after a broad cooling in housing in recent months. Tailwinds from tax cuts and one of the strongest job markets in decades continue to elevate sentiments and boost demand. Lumber prices have also fallen almost 50% since reaching a record in May.

At the same time, affordability continues to present challenges, with rising home prices and borrowing costs, the report said. Data on housing starts and existing-home sales due this week are both projected to show declines in September from the prior month.

"Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases," NAHB Chief Economist Robert Dietz said in a statement. "Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019."

The confidence gauge in the Northeast climbed to a 13-year high of 64 and reached a four-month high in the West Measures of sentiment rose 2 points each in the Midwest and South.

Bloomberg News
Homebuilders Housing market Purchase NAHB