The National Association of Home Builders/Wells Fargo Housing Market Index surged six points in September to a score of 65, up from August's downward-revised mark of 59, the NAHB reported Monday.
All components of the index saw gains this month, with current sales expectations jumping six points, sales expectations for the next six months rising five points, and prospective buyer traffic growing four points.
September's level represents the highest HMI score since October 2015.
NAHB Chief Economist Robert Dietz cited tight inventory conditions and strong demand from potential buyers as the primary drivers behind September's strong HMI score. With the supply of available existing home sales on the market dwindling, buyers are looking to new homes to meet their needs.
This shift from strong existing sales to strong new sales follows the traditional pattern of a housing cycle, according to residential housing experts. "Existing home sales have been carrying the burden of the economic recovery for many years, and new construction is starting to assume its fair share of the marketplace," Tom Rhodes, CEO of Texas-based Sente Mortgage, told Construction Dive earlier this month.
Positive job numbers and low interest rates are also helping buyers feel more confident jumping into homeownership, according to Dietz. However, as builders start to ramp up new home construction, they are still hindered by supply obstacles. Labor and lot shortages continue to plague homebuilders, driving up construction costs and leading to higher home prices for buyers in an environment of affordability concerns.
The HMI is the first in the month's string of housing market reports. Monday's report will be followed by housing starts on Tuesday, existing home sales on Thursday, new home sales on Sept. 26, and pending home sales on Sept. 29.
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