Flight from the Cities: Home Builder Confidence Soars to Record High

Homebuilder in hardhat.
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The rush for homes in America has sent home builder confidence soaring.

Builder confidence in the newly built, single-family home market rose six points to 78 in August on the National Association of Home Builders/Wells Fargo Housing Market Index. That matches the 1998 record high in the 35-year history of monthly readings for the index.

Anything above 50 is considered positive sentiment. Economists had expected builder confidence to remain steady after jumping in July.

The index crashed in April but recovered quickly as the pandemic, lockdowns, and urban rioting led to an explosion of demand for houses outside of many city centers. A recent study from Zillow shows that home prices are increasing faster in the suburbs of many of the biggest U.S. cities, including New York, Chicago, Houston, Boston, Atlanta, and San Francisco. The same pattern was noticeable in smaller cities through June, Zillow’s study said.

The housing market has become one of the strongest parts of the economy in the post-lockdown phase of the pandemic.

“Housing has clearly been a bright spot during the pandemic and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020,” said NAHB Chief Economist Robert Dietz. “Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

Looking at the three-month moving averages for regional HMI scores, which smooths out temporary volatility and may provide a clearer guide to the housing market, the Northeast jumped 20 points to 65, the Midwest increased 13 points to 63, the South rose 12 points to 71 and the West increased 15 points to 78.

The extremely high demand for housing has caused some market disruptions, including a big increase in the price of lumber.

“The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs as measured on the HMI,” said NAHB Chairman Chuck Fowke. “However, the V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April. Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”

Tomorrow the government will release its count of housing starts—which measures new home construction— and construction permit applications for July. Economists expected strong gains.


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