Builders Continue Optimism

The November NAHB/Wells Fargo Housing Market Index rose four points to a level of 58 as builders continue to see promise in home selling. This marks the fifth consecutive month for the index to remain above the tipping point of 50 after a slow beginning to the year.

All three components rose with current sales rising five points to 62, expected sales rising two points to 66 and traffic rising four points to 45. These levels are close to but do not exceed the recent peaks of 63, 67 and 47 respectively in September.

The single-family recovery has been hesitant in 2014 with some modest movement forward held back by a slower than expected beginning. Single-family starts averaged 925,000 (on a seasonally-adjusted annual basis) in the first quarter, the same as calendar 2013. They made a modest improvement since then to an average of 1,024,000 in the third quarter.

NAHB expects the fourth quarter to bring continued improvement to that figure but the annual rate for 2014 is still likely to advance by less than 10 percent.

Builders are reflecting the optimism they receive from their customers as potential home buyers benefit from very low mortgage rates, affordable new home prices and price appreciation of their existing home. Pent up demand will push single-family production above 800,000 next year, particularly from current home owners who have experienced the normal life cycle changes that usually drive home buying but has been delayed.



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