November saw homebuilder confidence rise, according to the latest findings in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Graded on a scale from 0 to 100 using data about present home sales, expected sales and buyer traffic, the November HMI came in at 46. This was three points higher than the October index, which itself was an increase from September.
All three of the index’s major categories improved during November, contributing to this overall rise in confidence. Current sales conditions rose from 47 to 49 on the index, builders’ expectations for sales increased by seven points to 64 on the index and buyer traffic climbed from 29 to 32.
Previous increases in October and September were attributed to improving inflation. NAHB President Carl Harris said in a statement that the ease of election uncertainty likely contributed to the November boost as well.
“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,” said Harris. “This is reflected in a huge jump in builder sales expectations over the next six months.”
NAHB Chief Economist Robert Dietz struck a more cautious tone in his remarks:
“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. Moreover, while the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates. There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.”
During November, 31% of homebuilders cut prices—by an average of 5%. This is largely unchanged from recent months. The use of sales incentives also declined from 62% to 60% month-over-month.
Regional breakdown
The Northeast remains the U.S. region where homebuilders are most confident for the future; the Northeast posted both the highest raw rating on the index (54 out of 100) and the largest month-over-month increase (four points up).
The Midwest posted a three-point gain (up to 44), the South a one-point gain (42) and the West remained unchanged (41).
For the full homebuilder confidence report, click here.
