Builder Confidence at 8-Month High
Builder confidence in the market for newly built single-family homes rose to its highest level since March and the second highest on record since 2005.
The National Association of Home Builders/Wells Fargo Housing Market Index rose by two points to 70 in November. The component gauging current sales conditions rose two points to 77 and the index measuring buyer traffic increased two points to 50. Meanwhile, the index charting sales expectations in the next six months dropped a single point to 77.
Regionally, the Northeast jumped five points to 54 and the South rose one point to 69. Both the West and Midwest remained unchanged at 77 and 63, respectively.
“November’s builder confidence reading is close to a post-recession high–a strong indicator that the housing market continues to grow steadily,” said NAHB Chairman Granger MacDonald. “However, our members still face supply-side constraints, such as lot and labor shortages and ongoing building material price increases.”
Earlier this week the Mortgage Bankers Association said its Builder Application Survey reported October mortgage applications for new home purchases rebounded, jumping by 23 percent from September and by 16.1 percent from a year ago, the strongest growth rate in applications so far this year, following September’s hurricane related decrease.
MBA estimated new single-family home sales at a seasonally adjusted annual rate of 659,000 units in October, an increase of 15.4 percent from the September pace of 571,000 units, based on data from the BAS. On an unadjusted basis, MBA estimated 53,000 new home sales in October, an increase of 26.2 percent from 42,000 new home sales in September.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said home builders have put summer hurricanes behind them, noting strong gains despite supply-side constraints.
“The strength in the HMI reflects growing confidence in employment and income prospects,” Vitner said. “Builders are selling virtually everything they build relatively quickly but are concerned about rising costs and shortages of lots and skilled workers.
NAHB Chief Economist Robert Dietz agreed. “With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017,” he said.
The Index 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.
