Who’s feeling optimistic? Homebuilders!

Homebuilder confidence has reached new highs, according to a new survey. 

In a further show of strength for the housing sector, builder confidence in the market for newly-built single-family homes increased two points to 85 in October, further surpassing the previous all-time high of 83 recorded in September, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. These are the first two months the index has ever been above 80…

“The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB Chief Economist Robert Dietz. “NAHB analysis published last week showed that new single-family home sales are outpacing starts by a historic margin. Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of months’ supply.”

Bloomberg reports on the survey,

U.S. homebuilder confidence advanced in October to a fresh all-time high as record-low interest rates continued to fuel sales and the demand outlook.

A gauge of builder sentiment climbed to 85, the highest in records back to 1985, from 83 a month earlier, according to the National Association of Home Builders/Wells Fargo Market Index released Monday. The October reading was stronger than the median forecast of 83 in a Bloomberg survey of economists, and marked the sixth straight month builder sentiment has exceeded the consensus estimate.

The booming housing market has been a bright spot for the economy since the coronavirus lockdowns eased. Declining mortgage rates are making it easier for buyers interested in purchasing larger homes or relocating to suburbs as houses are increasingly viewed as remote workplaces in light of the pandemic.

Housing has also shown resilience in our state, as pointed out in the September revenue forecast.

  • Washington housing construction declined in the second quarter but exceeded the June forecast. Washington housing units authorized by building permits averaged 40,300 (SAAR) in the second quarter of 2020, down from 49,800 in the first quarter. Second quarter permits consisted of 17,800 single-family units and 22,600 multi-family units. The June forecast predicted 12,300 single-family units and 16,700 multi-family units for a total of 28,900 units in the second quarter. Housing construction remained moderate at the beginning of the third quarter. In July, single-family permits improved to 23,600 units (SAAR) and multi-family units slowed to 17,400 for a total of 41,000 units.

  • Seattle-area home prices declined for a third consecutive month in June following eleven consecutive increases. According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted Seattle home prices decreased 0.2% in June following declines of 0.2% and 0.3% in April and May. The composite-20 index was unchanged in June. Seattle home prices were still up 6.5% over the year. In comparison, the composite-20 index was up 3.5% over the year. In June, Seattle home prices were up 100% since the December 2011 trough and exceeded the May 2007 peak by 39%. The reported June figure is for the three months ending in June.

And real estate activity contributes to the strengthened revenue outlook.

  •  The real estate market has been much stronger than expected. While taxable activity was depressed from April through July, by August activity was above its year-ago level. Because of this, real estate excise tax (REET) collections since June came in $103 million higher than expected. REET collections for the current biennium are now forecasted to be $281 million higher than forecasted in June.

A little good news and optimism is always welcome.