Click To See Today's Rates

Posted 09/20/2016

NAHB: Hottest Housing Market In 11 Years

NAHB Housing Market Index 2016-09

Builders Say Strong Market Will Stay On Course

Home builders feel terrific about the future U.S. housing.

With today's mortgage rates ultra-low and U.S. rents rising, home builders are planning for another strong finish to the year for housing, and a fantastic start to 2017.

Market confidence among the nation's builders is at decade-best levels.

As measured by the National Association of Home Builders' Housing Market Index (HMI), home builder sentiment reads 65 out of 100, which is a "confident" figure.

It's the strongest reading in nearly a year, and certain components of the index exceed confidence levels of 11 years ago.

Builders are excited about the 2017 housing market -- and for good reason.

The combination of the lowest mortgage rates in at least 3 years, the rising cost of rent, plus an abundance of loans for buyers with less than 20% down have changed today's math of "Should I rent or should I buy?".

Home builders plan to sell more than 650,000 new homes this year, and buyers could usher in even higher demand next year.

The best "deals" in new construction housing may be the ones you find today.

Click to see today's rates (Sep 26th, 2016)

Why Everyday Home Buyers Follow NAHB'S Housing Market Index

Once monthly, the National Association of Home Builders (NAHB) surveys its members on current housing market conditions; and their outlook for the housing market's future.

The results are compiled into the Housing Market Index.

Informally, the report is called the "home builder sentiment survey" and it reflects home builder attitudes about the nation's single-family, new construction housing market.

The index is one of the most anticipated reports published each month, because it provides clues to housing market health six-to-twelve months in advance.

Home builders gather real-time, "on the ground" data as they observe buyer foot traffic and actual sales in their day-to-day business. They recognize trends long before economists do.

For instance, a home builder sees rising interest in its homes. Potential buyers visit model homes and sign contracts to buy.

In response, the builder obtains new building permits and breaks ground on new developments. Conversely, it will hold off on new projects if foot traffic wanes.

Without the Housing Market Index, economists would likely only have access to data around building permits and homes on which construction has begun. But that data is a lagging indicator of what happened in the market months prior.

This report, though, is one of the earliest indicators of the home market.

The forward-looking report is important to economists, but can be valuable to the everyday home buyer, too.

Many buyers today feel they have "missed out" on future home appreciation, now that house values have risen steadily since 2012. They feel demand for homes will drop and, in turn, prices will cool off.

Home builders would beg to differ.

Today, builder sentiment reads a staggering 65, well surpassing the range of around 60 for the past fifteen months.

The report signals renewed strength in the housing market.

The HMI has not hit a reading of 65 since October 2015. Prior to that, the index stretches back ten years without a higher "score."

In the NAHB Housing Market Index, 50 is the inflection point in the index between "good" conditions and "poor" ones; and September's reading marks the twenty-seventh straight month in which the HMI has logged north of 50.

Buoyed by low mortgage rates and big demand from buyers, home builders believe today's housing market is solidly in positive territory.

Home buyers who have been on the sidelines should consider entering. September's HMI indicates the market will be strong in 2017, and perhaps beyond.

Click to see today's rates (Sep 26th, 2016)

Builders Correctly Forecasted The 2016 Market

The NAHB Housing Market Index is a composite survey. It's results are based on three distinct questions posed to home builder trade group members.

Each question polls a separate facet of a home builder's business.

The monthly readings, as reported by the home builder trade group:

  • Current home sales activity : Reading of 71 (+6 from one month ago)
  • Home sales activity for the next six months : Reading of 71 (+5 from one month ago)
  • Buyer foot traffic : Reading of 48 (+4 from one month ago)

The housing market is strong on all fronts. Especially telling is the future sales component of the index. Builders stated the highest reading since nearly a year ago.

In October 2015, builders took the pulse of the market and stated the 2016 market would see continued strength.

They were right.

Now, builders are calling for fast home sales (meaning higher prices) next year. Home buyers should consider the effect of higher prices -- and potential mortgage rate increases -- on their plans. They can be on the winning side of rising values.

Buyers may not know specifically what a mortgage is, they do know that their rents are rising and that buying a home could be better than renting into 2017.

So long as the math buying over renting, builders will continue to have optimism for the future of U.S. housing.

Ultra-High Demand For Homes In The West

As with everything in real estate, location matters.

Home buyer demand is strong across the U.S., but western states are faring the best, as home builders see it.

  • Northeast: HMI reading of 43 (+1 from one month ago)
  • Midwest: HMI reading of 56 (+3 from one month ago)
  • South: HMI reading of 68 (+4 from one month ago)
  • West: HMI reading of 82 (+14 from one month ago)

If builders across the U.S. are confident, those in the West are all but certain about the next six-to-twelve months.

That's good news for builders, but home buyers could face challenges. Bidding wars and above-list-price offers could be the rule, not the exception.

And free home upgrades will be all but off the table.

Still, new homes could be worth the effort. Homes that are newly built often come with warranties that protect the homeowner against expensive defects. New homes occasionally need repairs, just like older ones, and it's rarely a "bad" idea to receive a warranty if one is offered.

Home buyers in western states can still find value in new homes, despite high competition. As rents rise, buyers are locking in housing costs by purchasing new and used homes in every region of the country.

What Are Today's Mortgage Rates?

To today's buyers, new construction homes can be appealing. New homes are often built with the latest amenities and technologies and, because of low interest rates, they're often affordable, too.

Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

Click to see today's rates (Sep 26th, 2016)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

3 Testimonials

Deborah C. Television Crewer

The Mortgage Reports is part of my morning routine. As I read, I learn more, and have come to understand the mortgage industry. I can't thank you enough!

Dan H.

The Mortgage Reports is very informative and very helpful. Its daily updates are among the first emails I open each morning.

Jerolyn C. CPA

The Mortgage Reports isn't just basic mortgage rate information -- it's analysis on rate changes and trends, and updates on the laws in lending. Subscribing to the site's daily updates is worthwhile.

2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)