Low Rates Push Homebuilder Optimism to Record High

U.S. home builder confidence rose for a third straight month in August to match a record high as record-low interest rates spur a surge in customer traffic, especially in suburban markets that are growing in appeal as a result of the coronavirus pandemic, data released on Monday showed.

The National Association of Home Builders/Wells Fargo Housing Market Index rose 6 points to 78, matching a series record set in 1998. The median expectation among 30 economists in a Reuters poll was for a rise to 73 from July's reading of 72.

NAHB's measures of both current and future home sales improved.

"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."

The U.S. Census Bureau will report July's housing starts data on Tuesday, and economists polled by Reuters are looking for an increase to 1.24 million units on an annualized basis from 1.186 million in June.

Housing starts plunged this spring during widespread lockdown orders issued to try to contain the virus, but have rebounded sharply from a six-year low hit in April. The economy fell into recession in February as a result of the COVID-19 pandemic.

A separate report from the New York Federal Reserve Bank on Monday showed the pace of growth in manufacturing activity slowing much more than expected in August from a 14-month high in July.

The New York Fed's Empire State Manufacturing Survey index dropped to 3.7 from 17.2. Economists polled by Reuters had expected a reading of 15, with a reading above zero indicating expansion.

The survey's measures of new orders and shipments both pulled back after three straight months of increases.