Thanks to Republicans sweeping the levers of power in Washington, D.C. during the recent elections, builder sentiment has improved for the third straight month and the construction industry expects market conditions to continue getting better, according to the latest housing market index survey from the National Association of Home Builders (HAHB) and Wells Fargo.
The monthly survey showed that builder confidence for the new single-family home market reached 46 in November, up three points from October, on the news that Republicans will control the White House and both houses of Congress in the new administration. Scores above 50 indicate that more builders view industry conditions as good, rather than poor.
“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to construction of more homes and apartments,” said Carl Harris, NAHB chairman. “This is reflected in a huge jump in builder sales expectations over the next six months.”
The survey’s three sub-indices were up in November, including the component measuring sales expectations in the next six months, which jumped seven points to 64. The index following current sales conditions was up two points to 49, and the index showing traffic of prospective buyers was at 32, three points above October levels. Component indices are used as part of the main index.
About 31% of builders cut home prices in November, a share that has hovered between 31% and 33% since July. The average new-home price reduction was 5% in November, just below the 6% level reported in October’s report. The use of sales incentives dropped to 60%, down from 62% in October.
“While builder confidence is improving, the industry still faces many headwinds, such as an ongoing shortage of labor and buildable lots, along with elevated building material prices,” said NAHB Chief Economist Robert Dietz. “Moreover, while the stock market cheered the election results, the bond market has concerns, as indicated by a rise for long-term interest rates. There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.”
