Home Builder Confidence in Housing Market Hits All-Time High
Home builders are getting increasingly optimistic about the housing market following months of historic demand.
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While parts of the construction industry remain sluggish, the home building sector has been on something of a hot streak in recent months. Despite the complications stemming from the coronavirus pandemic, housing has ramped up production to meet increasing demand in the market.
In response to these high levels of activity, the NAHB/Wells Fargo Housing Market Index — a metric that gauges how builders view the current and near-future housing market — rose six points to a score of 78 in August. That matches the highest HMI score ever recorded, set in December 1998. (Scores can run from zero to 100.)
“The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs as measured on the HMI,” said Chuck Fowke, chairman of the National Association of Home Builders.
While the high levels of demand and favorable interest rates are not expected to drop off any time soon, other factors could limit housing’s potential for continued growth.
“The V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April,” said Fowke. “Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”
The NAHB recently wrote an open letter to the White House, calling on the federal government to step in and help normalize the skyrocketing price of lumber, which they estimate will add thousands of dollars to the cost of the average home.
Despite these concerns, the surge in home building has been a definite boost for the construction industry and U.S. economy at large.
“Housing has clearly been a bright spot during the pandemic,” said Robert Dietz, chief economist for the NAHB. “The sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020.”