U.S. homebuilder confidence soars as NAHB housing index rises to highest level in a year

The NAHB Housing Market Index, also known as the NAHB Home Price Index, is an index produced by the National Association of Home Builders (NAHB)/Wells Fargo based on a survey of home builders. It predicts future housing market trends by measuring builders’ perceptions of the future housing market.
The NAHB Housing Market Index serves as a good leading indicator of home sales and overall spending, and will sometimes have an impact on market trends; in addition, the NAHB Housing Market Index can assess home sales and homebuilder confidence, and is indicative of future U.S. housing market trends.
U.S. builder sentiment is optimistic
According to the National Association of Home Builders/Wells Fargo Housing Market Index, U.S. homebuilder confidence rose one point to 68 in September, well above expectations. August’s figure was revised upward one point to 67, and September’s index was the highest level since October of last year. (An index above 50 is considered positively optimistic, indicating that developers believe the housing market is expanding, while an index below 50 indicates that developers believe the housing market is shrinking.)

When mortgage rates soared, the confidence index had fallen to a low of 56 in December last year.
One of the key reasons for the gradual rebound in that confidence index is the decline in home loan rates. According to Mortgage News Daily, the average 30-year fixed rate fell from 3.96 percent in mid-July to 3.46 percent in the first week of September.
Low interest rates and solid housing demand continue to drive up builder sentiment, even as they need to continue to grapple with challenges in the short supply of affordable housing,” said NAHB Chairman Greg Ugalde.
Index of current home sales also rises
The index measuring current sales also increased 2 points in the report, rising from 73 to 75 (the highest since June), although sales expectations for the next six months fell 1 point to 70.
The index representing buyer traffic was steady at 50, with values of 50, 48 and 47 in August July and June, respectively.

Builders closely watching U.S.-China trade developments
According to the CNBC article, the report also carries warning signs. Mortgage rates picked up in early September, and the U.S.-China trade dispute remains a dark cloud over the housing industry.
“Builders are showing increasing concern about the uncertainty created by the trade dispute with China,” said Robert Dietz, NAHB’s chief economist. “NAHB’s Residential Construction Geography Index shows that the slowdown in manufacturing is holding back housing construction in parts of the country, despite growth in rural and suburban areas.”
Lack of supply is the biggest obstacle to a strong recovery in the U.S. housing market today. The vast majority of new construction remains in the mid- to high-end price range, but demand for entry-level, lower-priced homes is strongest. Today’s younger buyers are also more interested in suburban homes than previous generations of their age, but that’s not where most of the construction growth is occurring.
Nationally, the western U.S. housing market performed best: Looking at the three-month moving average of regional scores, the Northeast rose 2 points to 59, the West rose 2 points to 75, the South rose 1 point to 70, and the Midwest did not change to 57.