Builder confidence in the single-family market reached new peaks in November. The latest NAHB/Wells Fargo Housing Market Index (HMI) revealed a five-point increase to 90 this month, breaking the previous all-time record of 85 in October and showcasing successive all-time highs over the past three months.
Derived from a monthly NAHB survey, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” Any number over 50 indicates that more builders view current conditions as good rather than poor.
“Historically low mortgage rates, favorable demographics, and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17% in 2020 on a year-to-date basis,” says Chuck Fowke, NAHB chairman. “Though builders continue to sign sales contracts at a solid pace, lot and material availability is holding back some building activity. Looking ahead to next year, regulatory policy risk will be a key concern given these supply-side constraints.”
All of the individual housing market indices within the report also posted their highest readings ever in November. The index gauging current sales conditions rose six points to 96; the component measuring sales expectations in the next six months increased one point to 89; and the measure charting traffic of prospective buyers rose three points to 77.
For the three-month moving regional averages, the Northeast increased two points to 83, the Midwest jumped six points to 80, the South rose four points to 86, and the West increased four points to 94.
“Another record high for the HMI reflects that housing is a bright spot for the economy,” says Robert Dietz, NAHB chief economist. “However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front. In the short run, the shift of housing demand to lower-density markets such as suburbs and exurbs with ongoing low resale inventory levels is supporting demand for home building.”
In the press announcement, the organization did note that 69% of the November responses were received before the election for president was called by the media on Nov. 7. The election results, and their future impacts on housing market conditions, will be more fully reflected in the December report.