Sentiment among homebuilders surges in September

Kevin Dobbs | FlashRatings | Monday, September 19, 2016 1:57 PM EDT
U.S. homebuilders are growing substantially more confident, reflecting job-market advances and gains in household income, results of a new survey released Monday show.

The September reading from the National Association of Home Builders/Wells Fargo Housing Market Index rose six points to 65 from 59 in August. It marked the highest reading since October 2015. Anything above 50 is considered positive.

The NAHB credited low mortgage rates that help make homes more affordable, as well as a strengthening labor market and recent advances in household income. It said those are the drivers of rising demand for new houses and the collective catalyst for the surging sentiment among homebuilders.

“As household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward,” NAHB Chairman Ed Brady, a home builder from Bloomington, Ill., said in a release announcing the latest survey results. “The single-family market continues to make gradual gains and we expect this upward momentum will build throughout the remainder of the year and into 2017.”

In 2015, the median household income among Americans was $56,500, up 5.2% from the previous year and representing the biggest one-year increase since the U.S. Census Bureau started tracking such data in 1967. The national poverty rate also declined, falling 1.2 percentage point last year to 13.5%, the biggest drop since 1999, the Census Bureau said last week.

Job market conditions this year could lay the groundwork for further improvement, bolstering homebuilders’ reasoning for confidence. Unemployment held steady at 4.9% over the course of June, July and August. Over those three months, American employers added an average of 232,000 jobs per month, according to a report from the U.S. Department of Labor.

“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” NAHB Chief Economist Robert Dietz said.