Builder Confidence Index Fights the Market

a man wearing a hard hat and holding his hands to his face

On July 18th, the S&P 500 and Dow Jones both broke all-time highs. Despite global uncertainty, strong domestic jobs numbers have brightened the overall economic outlook.

The question is this: with markets breaching all-time highs, why did builder confidence take a step back in July?

Measuring Builder Confidence

For the last 30 years, the National Association of Home Builders (NAHB) has conducted monthly surveys of new-home builders to gauge their outlook in three key areas:

  • Single-family home sales for the next 6 months
  • Overall sales for the next 6 months
  • Prospective buyer traffic for the next 6 months

These numbers are combined, adjusted for season, and given a score. The result is the Housing Market Index (HMI). Since last December, the index has stayed steady between 58 and 61. The all-time high was reached in October of last year when it reached 65. Though predictions for single-family home sales and prospective buyer traffic both dropped just one point in July, the index for overall sales dropped a full three points.

NAHB Economist on the Market

NAHB Chief Economist Robert Dietz commented on the July HMI numbers, stating that despite the predictions of strong and steady economic growth, regulatory constraints and an ongoing labor shortage are hurting builder confidence. Real estate agents and lenders would be wise to keep an eye on the HMI going forward; the market is steady, but should the HMI drop below 58 or rise above 61 new strategies may be needed.

Title Insurance & Closing Services from Lakeside Title

Lakeside Title Company is a title insurance agency that serves builders, lenders, and realtors in Maryland, Washington D.C., Northern Virginia, and Southern Pennsylvania. We close over 4,000 transactions a year from 14 different locations. Visit our homepage today to learn more about how we can help you!

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