Homebuilder confidence increased in August as new construction and new home sales increase, according to the Housing Market Index by the National Association of Home Builders and Wells Fargo.
Builder confidence in the market of newly constructed single-family homes in August rose two points to 60, up from July’s downwardly revised reading of 58, according to the index.
“New construction and new home sales are on the rise in most areas of the country, and this is helping to boost builder sentiment,” said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Ill.
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI categorizes builder perceptions of current 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 a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
“Builder confidence remains solid in the aftermath of weak GDP reports that were offset by positive job growth in July,” said NAHB Chief Economist Robert Dietz. “Historically low mortgage rates, increased household formations and a firming labor market will help keep housing on an upward path during the rest of the year.”
In the second quarter of 2016, real gross domestic product, the value of everything a nation produces, grew at a rate of only 1.2% from last year, according to the estimate released by the Bureau of Economic Analysis.
On the other hand, total non-farm payroll employment increased by 255,000 in July, far above what experts predicted.
Two of the three HMI components increased in August. The component gauging current sales conditions increased two points to 65, while the index showing sales expectations over the next six months increased one point to 67.
On the other hand, the component measuring buyer traffic fell one point to 44.
Regionally, the South increased by two points to 63 and the Northeast, while remaining the lowest, rose two points to 41. The West remained unchanged at 69, but the Midwest actually dropped one point to 55.
