You want builders to be confident, right? They are. If data is an indication, they’re giddy, especially the ones tracking the numbers.
Builder confidence for newly-built single-family homes has hit an all-time of 83 in September, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The index is a gauge of builder opinion on the relative level of current and future single-family home sales.
It’s a good sign of the housing recovery.
The confidence index is the highest reading in the 35-year history. The previous high was 78, set in 1998.
The HMI in the South region, which includes Texas, rose eight points to 79.
What’s the methodology for the index? It is based on a survey that has been mailed to a panel of NAHB builder members every month since January 1985. The survey asks builders to rate housing market conditions based on their experiences. The builders will rate current sales conditions, sales expectations, and traffic of prospective buyers.
The builders rate the first two on a scale of good, fair, or poor and the last on a scale of high to very high, average or low to very low. From there, it’s a lot of fancy math. An index is calculated for each series by applying the formula (good – poor + 100)/2 or, for Traffic, (high/very high – low/very low + 100)/2. Each resulting index is seasonally adjusted, then weighted with the three component indices.
Believe it or not, the formula to pick the teams for the College Football Playoff, the one that’s voted on in Grapevine, is more complex.