Wednesday, October 16, 2013

NAHB: Builder Confidence declines in October to 55

by Bill McBride on 10/16/2013 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) declined in October to 55 from 57 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.  (September was revised down from 58 to 57).

From the NAHB: Builder Confidence Down in October; NAHB Estimates Sept. Housing Starts will Approach 900,000 Units

Builder confidence in the market for newly built, single-family homes fell two points in October from a downwardly revised reading in the previous month to a level of 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.

“A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation’s debt limit have caused builders and consumers to take pause,” said NAHB Chief Economist David Crowe. “However, interest rates remain near historic lows and we don’t expect the level of rates to have a major impact on sales and starts going forward. Once this government impasse is resolved, we expect builder and consumer optimism will bounce back.”
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All of the HMI’s three components each fell two points in October. The component gauging current sales conditions registered 58, while the component gauging sales expectations in the next six months posted a reading of 62 and the component gauging traffic of prospective buyers was 44.

Looking at the three-month moving averages for regional HMI scores, the South held steady at 56, the West declined a single point to 60 and the Northeast fell three points to 38. The Midwest posted a one-point gain to 64.
emphasis added
HMI and Starts Correlation Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the October release for the HMI and the August data for starts (September housing starts were scheduled to be released tomorrow, but will now be delayed). This was below the consensus estimate of a reading of 57.