Builder Confidence Continues Rise in November

The NAHB/Wells Fargo Housing Market Index rose another five points to a 6-year high of 46 in November. The component measuring traffic remained unchanged at 35; the component measuring current sales rose 8 points to 49 while the component measuring future demand rose two points to 53. The expectation component has been above the tipping point of 50 for three consecutive months (above 50 being the point where more builders see a better market ahead than see a poorer market).
Regional three-month moving average index levels also rose two to four points, Northeast to 31, Midwest to 45, South to 43 and West to 47. The Northeast index is the only region that has hesitated in the last several months, remaining in a narrow band of 29 to 31 for six months. Single-family permits have behaved similarly, running between 40,000 and 45,000 since March 2012. The FHFA price index changes for the two divisions within the Northeast region have been among the lowest recently. The Northeast is the only region with a higher unemployment rate now than one year ago and in two months ago.
Builders report continued difficulties with buyers qualifying for mortgages and low appraisals below the contract price. But the source of the increasing optimism centers on improved buyers’ attitudes. Builders report buyers who are able to obtain a mortgage are ready to buy after postponing their purchase for years. Low inventory or the wrong inventory in the existing home market has also benefited home builders. Over the past year, new home sales have increased 27% while existing home sales have increase 11% as the available and appropriate inventory of existing homes dries up.
The new home inventory is also very low but builders are able to respond to orders, at least as the market begins to recover. Lot inventory is low and in some markets will soon become a limiting factor to continued expansion. Material prices, particularly lumber and wood products, have risen and in a few markets construction labor and subcontractor availability has begun to worry builders. A continued home building expansion will require attracting the resources, materials, labor and land, from their current usage and that will likely mean a rise in home prices.

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10 Responses to Builder Confidence Continues Rise in November

  1. Jason says:

    We’ve done well overall, but I’ve been reading where some home builders are having problems both in getting enough workers to build homes and in getting enough supplies, since many companies closed when times were tough. It’s an interesting problem to have, but one that slows things down just as it seems things are ready to push forward.

  2. [...] The NAHB/Wells Fargo Housing Market Index (HMI) rose another five points to a 6-year high of 46 in Nov…. The HMI measures builder confidence for the single-family market. [...]

  3. [...] The NAHB/Wells Fargo Housing Market Index (HMI) rose another five points to a 6-year high of 46 in Nov…. The HMI measures builder confidence for the single-family market. [...]

  4. [...] recovery for new single-family home construction that has been observed via housing starts and the HMI. With permit authorizations climbing rapidly and hitting their highest levels since the summer [...]

  5. [...] recovery for new single-family home construction that has been observed via housing starts and theHMI. With permit authorizations climbing rapidly and hitting their highest levels since the summer [...]

  6. [...] recovery for new single-family home construction that has been observed via housing starts and the HMI. With permit authorizations climbing rapidly and hitting their highest levels since the summer [...]

  7. [...] here. Now that the real estate market is again on the upswing (please God not like last time!) and builder confidence is good, there is a new development ready to be built in an area just south of town near the Damon [...]

  8. [...] The NAHB/Wells Fargo Housing Market Index (HMI) rose another five points to a 6-year high of 46 in Nov…. The HMI measures builder confidence for the single-family market. [...]

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