Treasury yields have started to move higher from the record low levels reached in August, but sentiment among homebuilders remains strong as even at these levels interest rates are making housing much more affordable. The latest release of sentiment from the National Association of Homebuilders (NAHB) came in stronger than expected, rising from 67 up to 68 versus estimates for a reading of 66. At the current level of 68, sentiment is the highest it has been since last October, just before the market swooned in Q4.
Looking at the internals of this month’s report, strength was pretty broad-based. In terms of the headline index’s components, Future Sales was the only one that declined, and the magnitude of that drop was only modest. Present Sales increased from 73 up to 75, while Traffic was unchanged right at the neutral mark.
The chart below shows the regional breakdown of homebuilder sentiment going back to 2005. Sentiment in the Midwest was unchanged at 59 and is now the region of the country where sentiment is the weakest. That tag previously belonged to the Northeast, but after this month’s 8 point jump, sentiment in that region of the country is tied for its highest level since the Financial Crisis. Sentiment in the South and West saw smaller improvements in sentiment this month, but builders in those regions are still much more optimistic than they are in the Midwest and Northeast. Start a two-week free trial to Bespoke Institutional to access our interactive economic tools.