Housing Market Index Continues to Rise Three-Point Jump in October Composite
The Housing Market Index, a measure of builder confidence in new single-family homes, has reached a level last seen when the market was skyrocketing some 10 years earlier.
The Housing Market Index, a gauge of builder confidence for newly constructed single-family homes, reached a level in October not seen since the market was booming in late 2005.
Members of the National Association of Home Builders were so optimistic about current market conditions that they helped drive the Housing Market Index to a reading of 64, a rise of three points over September.
Builder confidence has now held steady or increased for five straight months.
"This upward momentum shows that our industry is strengthening at a gradual but consistent pace," David Crowe, NAHB chief economist, said. "With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015."
Two of the three HMI components increased in October. Sales expectations in the next six months jumped seven points to 75, and current sales conditions increased three points to 70. The buyer-traffic component remained unchanged at 47.
The Housing Market Index is derived from a survey of NAHB members. They are asked to evaluate single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."
Scores for each component are then used to calculate the overall HMI. Any number above 50 is a sign that more builders view conditions as good than poor.
"The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward," Tom Woods chairman of the NAHB, said.
All four regions gained ground. The West climbed five points to 69. The Northeast, Midwest and South each gained one point to 47, 60 and 65, respectively.
Woods added a note of caution, however.
"Our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor," Woods said.
A Good Time to Remodel?
Home values continue to rise, and because of that, more and more homeowners have decided now is a good time to remodel.
Daily Real Estate News, a publication of the National Association of Realtors, said spending on home remodeling is expected to climb from 2.4 percent in the second quarter to 6.8 percent by the second quarter of 2016. The publication cites Harvard University's Joint Center for Housing Studies as the source of its information.
"Home improvement spending continues to benefit from the last year's upswing in housing market conditions including new construction, price gains and sales," Chris Herbert, managing director of the Joint Center, said in the NAR's newsletter.
"Strengthening housing market conditions are encouraging owners to invest in more discretionary home improvements, such as kitchen and bath remodeling and room additions, in addition to the necessary replacements of worn components such as roofing and siding," Herbert said.
Spending in the repair and remodeling industry is expected to grow to $300 billion in 2016. Much of that spending will be in small, discretionary projects, such as kitchens and bathrooms, the NAR said, citing John Burns Real Estate Consulting as the source of this information.