Builder confidence hits a six-year high

Continuing the recent momentum, builder confidence in the housing market for newly built, single-family homes increased three points from last month’s count, reaching 40, according to the National Association of Home Builders, which represents the housing industry, and Wells Fargo. The September number comes after a July spike and a slight climb last month. September’s three-point climb brings the builder confidence index to its highest level since June 2006.

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said Barry Rutenberg, NAHB’s chairman, in the release. Specifically, he continued, “unnecessarily tight credit conditions are preventing many builders from putting crews back to work — which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

Each of the three Housing Market Index components saw gains this month. Current sales conditions climbed four points to 42, sales expectations in the next six months increased eight points to 51 and traffic of prospective buyers inched up one point to 31. Broken down by region, the Midwest and West posted five-point gains — to a respective 40 and 43. The South saw a four-point gain to 36 and the Northeast inched up two points to 30.

The NAHB/Wells Fargo scale records sentiments on a 1-100 scale. Scores of 50 and above reflect positive sentiments.

NAHB’s Chief Economist David Crowe mentioned in the release that despite the improved numbers this month, caveats remain.

“Against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials,” he said. “Given the fragile nature of the housing and economic recovery, these are significant red flags.” — Zachary Kussin