Builder Confidence Nears Post Crash High

Builder confidence increased for the second consecutive month after taking a hit in September from the late summer hurricanes.  The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased 2 points in November, hitting 70, the highest score since March.  It was also the second highest reading for the index which measures NAHB's new home builder members confidence in the new home market since July 2005.

"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."

NAHB's monthly survey, which it has conducted for 30 years, ask asks builders to provide their perception of both current single-family home sales and their expectation for those sales over 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.

Two out of the three HMI components registered 2-point gains in November. The component gauging current sales conditions rose to 77 and the index measuring buyer traffic increased to 50.  The forward-looking component, charting expectations for the next six months, eased back 1 point to 77.  

Regional HMI scores are presented as three-month moving averages.  The Northeast jumped 5 points to 54 and the South rose 1 point to 69. Both the West and Midwest remained unchanged at 77 and 63, respectively. 

NAHB Chief Economist Robert Dietz commented, "Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory.  With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017."