NAHB Index Posts 11 Month High

• Growing household income raises home sales


• Positive NAHB numbers could raise clamor for a near term rate hike

The National Association of Homebuilders’ monthly housing market index, a measure of builder sentiment soared to 65 this month, evenly matched against the 11 month high that was the highest for the index since the year 2005. In a release today, the NAHB housing index posted a rise from a downwardly revised August report of 59, as the climbing household income promoted a positive outlook for the builders. Analysts polled by Reuters had forecast a September reading of 60.

Robert Dietz, the NAHB's chief economist stated that, "With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them." Dietz also commented that solid job creation and low interest rates are fuelling demand, while supply-side constraints including a shortage of labor and lots continuing to hamper builders. The NAHB also remained confident that upward momentum would be sustained into 2017.

“As household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward,” NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois said in a statement. “The single-family market continues to make gradual gains and we expect this upward momentum will build throughout the remainder of the year and into 2017.”

The most recent report from the US Census which was released last week concerning income and poverty reflected that the median household income grew in real terms by 5.2% to $45,516, this is the biggest increase it has experienced till date. The NAHB index measures the way builders rate in future and present market conditions for new home sales. It has been relatively stagnant over the past year, with the exception of the quick jump it had in October last year due to the rise in activity right before the loan disclosure rules were tightened.

Analysts believe that the recent rally in US home sales should strengthen the US economic expansion and also raise the chances of a rates hike by the Federal Reserve Bank before the end of the year. The very strong real estate market has mostly fuelled growth in US household wealth, as Fed data released in Friday showed that it had increased to $89.1 trillion in the second quarter. In the latest survey, the measure on current sales expectations rose 6 points to 71, while the gauge on sales outlook in the next six months increased 5 points to 71.