The NAHB's Housing Market Index rose for the sixth consecutive month in October, reaching its highest level in more than six years.

By Peter Ricci

The National Association of Home Builders’ (NAHB) Housing Market Index rose for the sixth consecutive month in October, bringing the index to its highest level in more than six years.

Indeed, the index, which covers builder confidence for the newly-built, single-family home market, now stands at 41, its highest level since June 2006; and though the index still has some ways to go – any measure less than 50 indicates more builders view conditions as poor than bad – it has still covered remarkable ground in 2012.

Housing Market Index – Considerable 2012 Gains

As this chart from Calculated Risk demonstrates, after four years of relatively sideways growth, the Housing Market Index has risen exponentially in 2012. In fact, from January 2012 to October, the index has increased 64 percent, and from October 2011, it’s increased 127 percent.

The other components of the Housing Market Index were also strong in October:

• The measures of current sales conditions and sale prospects were unchanged from September, holding fast at 42 and 51, respectively.
• The component measuring the traffic of prospective buyers, though, increased five points to 35, perhaps lending more credence to Redfin’s recent findings that prospective homebuyer demand had not slowed down with the change of the seasons.
• Additionally, builder confidence remained strong in the NAHB’s regional surveys, rising two points in the Midwest and West (to respective levels of 42 and 44) and three points in the South (to 39).

David Crowe – Challenges Ahead?

David Crowe, the NAHB’s chief economist, said that though the Housing Market Index has risen impressively, certain housing conditions may impact the future growth of the industry, including tricky appraisals and low inventory of building lots.

“These are the complicating factors,” Crowe said, “that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor.”