Builder confidence was buoyed in November, according to the National Association of Home Builders/Wells Fargo Housing Market Index, which jumped three points for the month to a reading of 20. Technically, the reading is the best the industry has seen since May 2010, when the index registered a reading of 22. However, given that those numbers were skewed by the home buyer tax credit, this month’s reading is the best the index has seen since April 2008, say Patrick Newport, U.S. economist at IHS Global Insight.
But while each of the index’s three components improved from October, the individual readings seemed somewhat contradictory. While the component measuring future sales expectations reported the highest reading, rising two points to 25, the component gauging prospective buyer traffic had the lowest reading, gaining one point to come in at 15.
The component gauging current sales conditions gained three points to a reading of 20. The index requires a reading of more than 50 to indicate that a majority of builders see conditions as good rather than poor.
The disparity, says David Crowe, NAHB’s chief economist, is the result of a higher caliber of prospects. “I think what’s happening is the traffic that is coming in seems to be of a higher likelihood of buying,” he said on a call with Builder today. “The builders are starting to see more serious buyers.”
According to Crowe, the trend has also shifted away from first-time buyers as builders are reporting more move-up customers.
On a regional level, the index saw a three point gain to 17 in the Northeast, an eight point gain to 23 in the Midwest, a two point gain to 21 in the South, and a six point decline to 15 in the West.
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.