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Housing Market Index Drops Slightly in October11-15-16 | Economic News

Housing Market Index Drops Slightly in October

But Home Builders Still Confident, NAHB Says

The Housing Market Index of the National Association of Home Builders dropped two points in October to 63, but the NAHB says it was a "mild pullback," considering the HMI jumped six points the previous month.

Builders of new single-family homes continue to believe the market is on solid ground, despite a two-point drop in the Housing Market Index in the month of October, the National Association of Home Builders said.

The HMI sustained a slight decline to 63, after surging six points to 65 in September month-over-month.

"October's reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains," said Robert Dietz, chief economist for the NAHB.

There are three components to the HMI, and the one that measures homebuilders' opinions about future sales expectations has been over 70 for the past two months, Dietz notes.

Coupled with the fact mortgage rates remain low shows there will be continued growth in the single-family market in the months ahead, according to Dietz.

"Even with this month's drop, builder confidence stands at its second-highest level in 2016, a sign that the housing recovery continues to make solid progress," said Ed Brady, chairman of the NAHB. "However, builders in many markets continue to express concerns about shortages of lots and labor."

Each HMI is the result of a monthly survey the NAHB has been conducting for 30 years. Builders are asked to rate current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate the HMI. Any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components posted losses in October. The component gauging current sales conditions dropped two points to 69, while the assessment of buyer traffic fell one point to 46. However, the measurement of sales expectations in the next six months rose one point to 72.

On a regional basis, the West increased two points to 75; the Northeast, Midwest and South each gained one point to 43, 56 and 65, respectively.

"We continue to look for gradual improvement in homebuilding, and expect housing starts to register a 1.17 million unit annual rate in September and 1.16 million units for 2016 as a whole," the Wells Fargo Economics Group said.