Builder Index Hits Record High As Suburbs Lure City Dwellers

Builder Index Hits Record High

Builder confidence is surging for the second consecutive month, hitting a record high of 85 in October, according to the National Association of Home Builders (NAHB/Wells Fargo) Housing Market Index (HMI). The index reached 83 in September, the first time it was higher than 80. 

“The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB Chief Economist Robert Dietz in a statement on Monday (Oct. 19).

The HMI assesses how builders perceive current single-family home sales and what they anticipate for the next six months. It also asks builders to rate buyer traffic.

New single-family home sales are outpacing starts by a historic margin, increasing by 4.8 percent in August, the biggest jump since September of 2006. Census estimates and NAHB surveys show a 69 percent increase over last year in homes being sold before they are built.

The HMI indicates that current sales conditions went up two points to 90, while prospective buyer traffic held steady at 74. Six-month sales expectations went up three points to 88. 

According to the three-month moving averages for regional HMI scores, the Northeast went up six points to 82; the Midwest rose three points to 75; the South increased three points to 82; and the West went up five points to 90, per the NAHB statement.

Low mortgage rates combined with a pandemic-fueled exodus from urban areas is advancing the building surge. 

In August, builder confidence went up six points to 78, which was the highest HMI reading in its 35-year history. Anything over 50 is considered a positive sign.

The COVID-19 pandemic has prompted many Americans to consider moving from urban areas to the suburbs or rural locales. An April Harris Poll found that 39 percent of city residents said the COVID-19 crisis has prompted them to consider living in less crowded places.