Home Builder Confidence Steadies After Three-Month Drop

A metric showing home builders' outlook on the housing market rose slightly heading into fall. Here's what you need to know.

According to the latest NAHB/Wells Fargo Housing Market Index (HMI), builder confidence in the housing market rose one point to a score of 76 in September. This slight uptick marks the first time in three months the HMI hasn’t dropped, signifying a fairly stable if not entirely optimistic outlook from home builders.

The HMI has dropped 14 points since hitting an all-time peak of 90 in November 2020. Reasons for the drop include ongoing logistical challenges slowing the materials supply chain, as well as a slight decrease in the overall demand for housing in the U. S.

“The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity, as reflected in the September HMI,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB).

“While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher.”

While housing demand may never again reach the historic levels experienced last fall, current levels of demand remain steady, and the production rate of single-family homes has fallen to a much more sustainable pace. Now the main concern for housing market experts is whether the rising cost of housing will push prospective home buyers out of the market.

“Single-family construction is normalizing at more sustainable levels after an increase in building material pricing,” said NAHB Chairman Chuck Fowke. “Demand remains strong, but the market is facing increasing housing affordability issues after a run-up in new and existing home prices.”

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