Building up: Homebuilder confidence hits new highs

For the second month in a row, an index tracking homebuilder sentiment hit a record

The National Association of Home Builders Housing Market Index reached a record high for the second consecutive month in October 2020. (iStock)
The National Association of Home Builders Housing Market Index reached a record high for the second consecutive month in October 2020. (iStock)

Homebuilders are feeling record levels of optimism, according to a new report.

The National Association of Home Builders/Wells Fargo Housing Market Index reached 85 in October, seasonally adjusted, the highest reading in the monthly metric’s 35-year history.

After experiencing a sharp decline in the spring, the NAHB index has been steadily rising — and even breaking records — ever since: In September, the NAHB index hit the prior record high with a reading of 83. Before that, the previous high was 78, which it first reached in December 1998, and hit again in August.

The index tracks homebuilder confidence in current and future single-family home sales and traffic of potential homebuyers on a monthly basis. A reading of more than 50 indicates a positive outlook; a reading under 50 indicates a negative outlook.

This month, sentiment toward home sales hit 90, the highest level recorded so far this year; last month, the reading was 88. The outlook for home sales in six months similarly jumped to 88 from 85 in September. Activity among would-be homebuyers was unchanged from September at 74.

The northeast and western regions of the country saw the largest month-over-month gains in sentiment.

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All components and regions measured by NAHB’s Housing Market Index saw significant year-over-year gains, underscoring the strength of the housing market this year.

Low mortgage rates and diminished housing supply has unleashed a flood of demand that drove up prices and prompted a surge in homebuilding.

The influx of demand has predominantly been from homebuyers with higher income levels. Those who have bad credit, who are often at lower income levels or have experienced job losses, are increasingly locked out of the market.