Homebuilder Sentiment Unexpectedly Rises With Solid Demand

Confidence among U.S. homebuilders unexpectedly rose in October, registering the first gain in five months amid falling lumber prices and solid demand, according to a report Tuesday from the National Association of Home Builders/Wells Fargo.

Highlights of Homebuilder Sentiment (October)

• Housing Market  Index increased 1 point to 68 (est. 66), according to a report Tuesday from the National Association of Home Builders/Wells Fargo.
• Current-sales gauge for single-family homes increased to 74 from 73;  gauge of six-month sales outlook rose to a three-month high of 75 from 74 
• Measure of prospective buyer traffic climbed to a seven-month high of 53 from 49

Key Takeaways

October’s pickup in sentiment across the three sub-indexes and all four regions indicates the market for newly-built homes may be regaining steam after a broad cooling in housing in recent months. Tailwinds from tax cuts and one of the strongest job markets in decades continue to elevate sentiments and boost demand. Lumber prices have also fallen almost 50 percent since reaching a record in May.

At the same time, affordability continues to present challenges, with rising home prices and borrowing costs, the report said. Data on housing starts and existing-home sales due this week are both projected to show declines in September from the prior month.

Official’s View

“Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases,” NAHB Chief Economist Robert Dietz said in a statement. “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.”

Other Details

• Confidence gauge in Northeast climbed to a 13-year high of 64; reached four-month high in West
• Measures of sentiment rose 2 points each in the Midwest, South