On a positive note, home builder confidence reached the highest level in a decade in October, as the NAHB housing market index rose to 64 – the highest since October 2005. Measures of current sales conditions and sales expectations both rose, while a measure of foot traffic held steady. According to the NAHB, “with October’s three-point uptick, builder confidence has been holding steady or increasing for five straight months. This upward momentum shows that our industry is strengthening at a gradual but consistent pace. With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015”. The report cautioned that “our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor”.
Housing starts rose to a near eight-year high in September, jumping 6.5% to an annual pace of 1.21 million units. The increase was driven by demand for rental apartments, with the multifamily sector rising 18.3% to a 466,000 rate. At the same time, the NAHB added a note of caution, “although our builders are gaining confidence in the housing market, they remain cautious about adding too much inventory”. Permits for new construction dropped 5% to an annual rate of 1.10 million, a six-month low.
In other good news out of the housing market, sales of existing homes rose in September to the highest level in eight years, increasing 4.7% to an annual pace of 5.55 million. According to the National Association of Realtors, “September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million)… affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace”.
On a negative note, the Chicago Fed’s National Activity Index signaled a weak month across the economy in September, driven by weakness in production.
Source: Federal Reserve Bank of Chicago