Builder confidence in the market for newly-built single-family homes edged one point lower to 70 in November, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The past two months mark the highest sentiment levels in 2019.
Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth. In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions. There has been substantial year-over-year improvement following the housing affordability crunch of late 2018, when the HMI stood at 60. However, lot shortages remain a serious problem, particularly among custom builders. Builders also continue to grapple with other affordability headwinds, including a lack of labor and regulatory constraints.
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market 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.
The HMI index gauging current sales conditions fell two points to 76 and the measure charting traffic of prospective buyers dropped one point to 53. The component measuring sales expectations in the next six months rose one point to 77.
Looking at the three-month moving averages for regional HMI scores, the Northeast posted a two-point gain to 62, the West was up three points to 81 and the South moved one point higher to 74. The Midwest remained unchanged at 58.
The full HMI tables can be found at nahb.org/hmi.