For the third straight month the level of builder
confidence in the new home market set a record high. The National Association
of Home Builders (NAHB) said the Housing Market Index (HMI) it co-sponsors with
Wells Fargo soared 5 points in November to 90. This is the highest level in the
35-year history of the HMI which set records of 83 in September and 85 in
October. These are the only times in its history that the Index surpassed the
80-point level and is triple its level in April when the pandemic caused it to
NAHB cautioned, however, that 69
percent of the survey responses were received before the results of the
presidential election were called on Nov. 7. The election results and their
future impacts on housing market conditions, will be more fully reflected in
December’s HMI report.
Robert Dietz, NAHB chief economist, said that builder
confidence has soared because historically low mortgage rates, favorable
demographics, and an ongoing buyer preference for the suburbs have spurred
demand and raised new home sales by nearly 17 percent year-over-year. He added,
“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.
Affordability, he said, remains a
concern. “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.”
Derived from a monthly survey of its
new home builder members, 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 for each component are then used to calculate a seasonally adjusted
index where any number over 50 indicates that more builders view conditions as
good than poor.
All three of these components posted
their highest readings ever in November. The HMI 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.
Regional scores are presented as three-month
moving averages. The Northeast increased two points to 83, the Midwest jumped
six points to 80, the South and West each rose four points to 86 and 94, respectively.