Builders’ confidence in the single-family new home market continues to rise, according to the latest survey of its members by the National Association of Home Builders (NAHB).
The trade association's Housing Market Index (HMI) rose to 46 in November, up from 43 in October, and its highest level since April, when it stood at 51, just above the break-even point.
The survey gauges builders’ perceptions of current single-family home sales and sales expectations as good, fair, or poor. From these scores, a seasonally adjusted HMI is calculated. A score over 50 indicates a positive outlook and digits below indicate a poor one.
Each of the HMI’s three components rose in November. The index for current single-family home sales climbed from 47 to 49, for the next six months from 57 to 64, and traffic from prospective buyers from 29 to 32.
The seasonally adjusted HMI for the Northeast rose from 52 to 59 and for the Midwest from 43 to 49. However, it fell from 43 to 42 in the South and from 44 to 39 in the West. The three-month moving average rose for the first three regions and remained stable at 41 in the West.
The survey also showed that 31% of builders continue to drop home prices, following a trend that began in July. The average price reduction was 5%, slightly below the 6% cut in October. The use of sales incentives fell from 62% in October to 60% in November.
NAHB chairman Carl Harris, a home builder from Wichita, KS, said the improved outlook was the result of the outcome of the elections. “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.”
However, NAHB chief economist Robert Dietz warned that the industry still faces many headwinds, like an ongoing shortage of labor and buildable lots, as well as elevated building material prices. “Moreover, the bond market has concerns, as indicated by the 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,” he noted.