The September NAHB/Wells Fargo Housing Market Index held steady at 58, the same as the one-point downwardly revised August level. The three components moved in different directions. Current sales remained the same at 62; future expectations declined to 65 from 68 in August and traffic rose one point to 47 from an upwardly revised 46.
The pause in sentiment in September is the result of continued head winds hunting for labor and lots and little improvement in credit access for builders and buyers. The added uncertainty of a spike in mortgage interest rates added to the uncertainty for buyers and builders.
At 58, the index is tied with August for the highest since November 2005. The HMI has risen steadily with a few backward moves since December 2011. Builders continue to expect continued expansion since the index passed above the 50 mark in June 2013 when more builders see improvement rather than not.
Housing starts have not moved as fast as the index in the past year, but that same disconnect occurred in 1991 when home builders’ sentiment doubled in four months while single-family starts rose by one-third. Currently, the HMI is about 50 percent greater than it was last year and single-family starts only 15 percent ahead of one year prior. Eventually, starts do catch up with builders’ sentiment if history is any indication.