U.S. homebuilder sentiment rises to 11-month high

HOME CONSTRUCTION INCREASED IN AUGUST to its fastest pace since 2007, with both apartment projects and single-family homes showing strength despite greater fears of an economic slowdown. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT
HOME CONSTRUCTION INCREASED IN AUGUST to its fastest pace since 2007, with both apartment projects and single-family homes showing strength despite greater fears of an economic slowdown. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT

WASHINGTON – Sentiment among U.S. homebuilders climbed to the highest level in almost a year on stronger current sales momentum, adding to signs that lower mortgage rates are giving the industry a boost.

The National Association of Home Builders/Wells Fargo Housing Market Index increased to 68 in September from an upwardly revised 67 in August, according to a report Tuesday that exceeded estimates in a Bloomberg survey. The index component for present sales of single-family homes climbed to the best level since May 2018, offsetting a drop in the the gauge of expected sales in the next six months. Buyer traffic was unchanged at the best level of this year.

Key insights

  • Mortgage rates have declined to the lowest level in almost three years as the trade war and weaker global growth weigh on the outlook for the world’s largest economy. Borrowing costs eased after the Federal Reserve in July cut interest rates for the first time in a decade, and policy makers are expected to make a second-consecutive reduction tomorrow.
  • Low interest rates and solid demand are underpinning builder sentiment despite supply-side challenges that reduce housing affordability, including a shortage of lots and labor, according to NAHB, a Washington-based trade group with more than 140,000 members.

Official’s view

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” NAHB Chief Economist Robert Dietz said in a statement. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China.”

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  • Sentiment in the Northeast matched the highest level since 2005, while readings for the South and West both climbed to the best level in more than a year. The Midwest was unchanged at the highest level in almost a year.
  • The manufacturing slowdown “is holding back home construction in some parts of the nation,” the NAHB said, citing its Home Building Geography Index, a quarterly measure of building conditions that uses county-level data on construction permits.
  • Readings above 50 indicate that more builders view conditions as good than poor.

William Edwards and Jeff Kearns are Bloomberg News staff writers.

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