As of September, builder confidence for newly built single-family homes remains solid at 67 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” says NAHB chairman Randy Noel. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.”

“A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” says NAHB chief economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.”

The National Association of Home Builders/Wells Fargo Housing Market Index is derived from a monthly survey that gauges builder perceptions of current single-family home sales and expectations for the next six months. They can rate conditions as “good”, “fair” or “poor”. The survey also rates traffic of prospective buyers as “high to very high,” “average” or “low to very low.” All the scores are used to calculate a seasonally adjusted index, where any number over 50 indicates that conditions are viewed as more “good” than “poor”.

The HMI index measuring current sales conditions rose one point to 74, while the component measuring expectations for the next 6 months rose 2 points to 74 and buyer traffic remained at 49.

For regional scores, the Northeast rose one point to 54 and the South remained at 70. The West moved down 1 point to 73 and the Midwest moved down 3 points to 59.

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