Builder confidence is up for the month of October thanks to renewed buyer interest in select markets. This is the largest one-month gain since April 2010 when renewed confidence from the home buyer tax credit was in full swing.
"This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country as extremely favorable interest rates and prices catch consumers' attention," said NAHB Chief Economist David Crowe. "However, it's worth noting that while some builders have shifted their assessment of market conditions from 'poor' to 'fair,' relatively few have shifted their assessments from 'fair' to 'good.' One reason is that builders are facing downward pricing pressures from foreclosed homes at the same time that building materials costs are rising, and this is further squeezing already tight margins."
Regionally, it was the West that led the way in builder confidence, posting a 9 point gain on the HMI scale. The only region that didn't post a gain was the Northeast, which was unchanged from the month prior.
New home sales also took a jump this month, according to the U.S. Commerce Deparment. They report that builders began work on 658,0000 homes, up 15 percent from August and the best pace in over a year. This is welcome news since each new home means more construction jobs.
This good news, though, is taken with a grain of salt, as the majority of the new home sales improvement was seen in the multi-family sector, which the National Association of Home Builders (NAHB) reported "roared ahead 51.2 percent to 233,000, the highest level in three years." They report this increase "is likely a product of some expected increase due to the greater demand for rental apartments as well as greater statistical variance. The start of a multifamily structure can account for multiple units so one large building started just after (or before) the month change can push the monthly figures up (or down) more than justified."
Completion of single-family homes continues to struggle. All regions saw declines in the number of homes that were completed, down overall 12 percent from August. The NAHB reports that "this could be an early sign of builders pulling back on future deliveries, or just a momentary pause as they reassess demand."
Single-family housing starts, however, produced mixed results this month. The Northeast and Midwest rose 21% and 46% respectively. The Southern region saw single-family starts decline 9% despite August being up 7%. The West's figures were unchanged from August.