Latest Market Updates: U.S. Builder Confidence Soars to Record Highs
Single-Family Construction Continues Dramatic Climb
According to the U.S. Housing and Urban Development and Commerce Department, total housing starts (the number of privately owned new houses on which construction has been started) rose 1.9% from August to September 2020—in comparison to 11.1% in September of last year.
There was also an 8.5% increase in single-family home building, which constitutes a large portion of the housing market. Building Permits, a future indicator of Housing Starts, were up 5.2% from August and 8.1% on an annual basis. Permits for single-family homes were even stronger, up 7.8% from August and 24.3% from September of last year.
“The housing market remains a bright spot in the U.S. economy, and this is reflected in today’s positive housing starts report,” said Chuck Fowke, Chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Florida. “Builder confidence is at an all-time high as buyer traffic is strong—another sign that housing is helping to lift the economy.”
“Home sales have exceeded for-sale home construction recently, which means additional home building in the near term,” said NAHB Chief Economist Robert Dietz.
Low interest rates are boosting demand in the housing market, resulting in an increase in mortgage applications. Analysts believe that support from the Federal Reserve is keeping rates at such modest levels. The housing market is also steadily benefiting from the changing preferences of a large chunk of the population, as people are increasingly looking for work-from-home friendly properties.
Builder Confidence Reaches Another Record High
According to the latest NAHB/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly-built single-family homes increased five points to hit an all-time high of 83 in September and again rose from 83 to 85 in October 2020—marking the second month in a row that it has set a record high.
Current sales conditions rose 2 points to 90, sales expectations in the next six months are up 3 points to 88, and buyer traffic remains unchangedat 74.
“Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said NAHB Chairman Chuck Fowke. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”
September Existing Home Sales Soar
Existing Home Sales came in strong in September, up 9.4% from August. This report measures closings, which means it likely represents buyers who were shopping for homes in June and July.
Sales were also up nearly 21% when compared to September of last year, which is the highest pace since 2006. Inventory remains tight, as there were only 1.47 million units for sale in September, down 19.2% compared to September of last year.
The median home price was reported at $311,800, up almost 15% year over year. Note that this doesn’t mean homes are not affordable. It just means the middle-priced home that sold was $311,800, with half the homes selling below and half above that price. Inventory remained tightest among lower-priced homes, impacting first-time buyers, which dropped from 33% to 31% of buyers in September.
On average, homes were only on the market for 21 days, which is an all-time low.