Homebuilders' confidence in the housing market skyrockets
A recent analysis from Harvard University’s Joint Center for Housing Studies posited that the housing market could lead the way in the post-COVID-19 economic recovery. That conclusion got a possible boost Tuesday when the National Association of Homebuilders released its latest study on builder confidence.
Builder confidence in the market for newly built, single-family homes soared 21 points to 58 in June,according to the NAHB/Wells Fargo Housing Market Index (HMI). Any reading above 50 indicates a positive market.
“As the nation reopens, hosing is well-positioned to lead the economy forward,” said NAHB Chair Dean Mon. “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
According to the Harvard analysis, the housing industry has often led the way out of recessions (the 2008 crisis excepted) because recessions lead to interest-rate drops that lower borrowing costs for both home buyers and builders. Those low costs, in turn, spur homebuilding “and the many related durable consumer goods industries that drive GDP growth.”
And the housing market does seem to be on an upswing. All HMI indices posted gains in June. The index gauging current sales interest spiked 21 points to 63; the index measuring sales expectations in the next six months rose 22 points to 68; and the index charting traffic of prospective buyers skyrocketed 22 points to 43.
Every region also showed gains. The Northeast spiked 31 points to 48. The South posted a 20-point gain to 62. The Midwest rose 19 points to 51. The West rose 22 points to 66.
However, NAHB Chief Economist Robert Dietz warned that the industry shouldn’t count COVID-19 out quite yet.
“Housing clearly shows signs of momentum as challenges and opportunities exist in the single-family markey,” Dietz said. “Builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower-density neighborhoods. At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market.”
