Builder sentiment improved for the third straight month and, with elections settled, builders expect market conditions will improve in the near-term future.
Builder confidence in the market for newly built single-family homes increased three points to 46 in November, according to the NAHB/Wells Fargo Housing Market Index (HMI).
“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” NAHB chairman Carl Harris said. “This is reflected in a huge jump in builder sales expectations over the next six months.”
The November HMI survey revealed 31% of builders cut home prices in November; the share has remained between 31% and 33% since July. The average price reduction was 5% in November. The share of builders using sales incentives was 60% in November, slightly down from 62% in October.
“While builder confidence is improving, the industry still faces many headwinds such as an ongoing shortage of labor and buildable lots along with elevated building material prices,” NAHB chief economist Robert Dietz said. “Moreover, while the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates.”
Dietz said the business sector and housing market also face policy uncertainty “as the executive branch changes hands.”
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores are used to calculate a seasonally adjusted index, where any value over 50 indicates more builders view conditions as good than poor.
The HMI metric tracking current sales conditions rose two points to 49 in November, the component measuring sales expectations in the next six months increased seven points to 64, and the gauge of traffic of prospective buyers posted a three-point gain to 32.
The three-month moving average for regional HMI scores rose four points to 55 in the Northeast, increased three points to 44 in Midwest, inched up one point to 42 in South, and held steady at 41 in the West.
