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Builder Confidence Rebounds Strongly in October

The HMI for October rose five points to 72, more than offsetting a four-point decline in September and equaling its reading of a year earlier.

“Rates on long-term mortgages have averaged well below 6% for many weeks now, and adjustable-rate loans have been around 4%, providing a powerful incentive to buy a home,” said NAHB President Bobby Rayburn.

“Another factor that’s undeniably contributing to builder optimism is the large turnout of prospective buyers at model homes and sales offices,” noted NAHB Chief Economist David Seiders. “The HMI component gauging traffic of prospective buyers has remained above 50 since May, which is a strong run for that index and a positive sign for potential sales activity.”

The index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes, prospects for sales activity in the next six months and the traffic of prospective buyers. Any number over 50 on the index indicates that more builders view sales conditions as good than poor.

Each of the HMI’s component indexes rose in October, with the largest gains registered for current sales activity (up five points to 78) and expected sales in the next six months (up nine points to 84). The component gauging traffic of prospective buyers rose two points to 54.

“We’re headed for another record year for new-home sales in 2004, and the long-term outlook is still very encouraging,” said Seiders. “Most builders are looking forward to a healthy marketplace moving into 2005.”

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