Builder confidence remains on steady ground

Builder confidence slipped a single point in November. But confidence for the last two months hit new highs for 2019.

The National Association of Home Builders reported today that the NAHB/Wells Fargo Housing Market Index for November dropped one point lower to 70. 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.

“Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “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.”

The HMI 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.

“We have seen substantial year-over-year improvement following the housing affordability crunch of late 2018, when the HMI stood at 60,” said NAHB Chief Economist Robert Dietz. “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.”

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.