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American Home-builder confidence reaches record high for third consecutive month
October 20, 2020

American home-builder confidence reaches record high for third consecutive month

Marketwatch.com reports that the construction industry’s outlook continued to improve in October, according to research from a trade group released Monday.

The National Association of Home Builders’ monthly confidence index rose two points to a reading of 85 in October, the trade group said Monday.

This was the third month in a row in which the index reading hit a record high, and together with September’s figure, only the second time that the confidence measure was at or above 80.

Index readings over 50 are a sign of improving confidence. The index dropped below 50 in April and May as concerns related to the pandemic intensified.

What happened: The index that measures sentiment regarding current sales conditions increased two points to 90, while the index of expectations for future sales over the next six months rose three points to 88. The gauge regarding prospective buyers remained the same at 74.

At a regional level, though, confidence varied. The indexes for the Northeast and the West both increased seven points in October to readings of 88 and 95 respectively. But in the Midwest the index dropped one point to 77, and it fell two points in the South to 83.

“New single-family home sales are outpacing starts by a historic margin,” Robert Dietz, chief economist at the National Association of Home Builders, said in the report. “Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of month’s supply.”

The big picture: While summer may now be gone, buyers are still searching for homes as if the weather was warm. Interest rates continue to drop to all-time lows — on Thursday, Freddie Mac FMCC, +3.84% reported that the 30-year fixed-rate mortgage averaged a record low of 2.81.

Looking to take advantage of the low rates, Americans have flooded the real-estate market. But with the inventory of existing homes so tight, many are considering newly-constructed homes instead.

The continued recovery in home sales should remain positive for the rest of the economy, though rising home prices could push some buyers out of the market eventually.

What they’re saying: “Buy a home and it needs to be filled with all sorts of consumer goods: furniture, appliances, etc.,” Renaissance Macro Research head of economics Neil Dutta wrote in a research note. “The link between consumption and home sales has been well established.”

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