September 17, 2019

.Homebuilder confidence rose 1 point in September to 68 after having risen 2 points in August.  While its current level is somewhat below the readings of 70-75  at this time last  year, a level of 68 is indicative of a solid level of confidence going forward,

NAHB Chairman Greg Ugalde said that, “Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,”

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

Traffic through the model homes was unchanged in September at 50 after having risen 1 point in July.  The combination of falling home prices and lower mortgage rates should boost traffic in the months ahead.

Reflecting optimism about the future the homebuilders expectations index fell 1 point in September to 70 after having risen 1 point in July.  The index remains at a lofty level of 70.

Not surprisingly there is a fairly close correlation between builder confidence and housing starts.  Given the rebound in the expectations component it is likely that housing starts will pick up further in the months ahead.  But builders continue to have difficulty finding labor so the upswing in starts will probably be muted.

However, builders have many units that have been authorized but not yet started.  Our sense is that as labor slowly becomes available builders will continue building new homes.  Thus, we look for starts to climb about 4% this year.

Stephen Slifer

NumberNomics

Charleston, SC