Builder Confidence Sets Another Record in November

HMI Hits All-Time High for Third Straight Month

Washington, D.C. (PPD) — The NAHB Housing Market Index (HMI) reported builder confidence soared another 5 points to 90 in November, smashing the all-time high and beating the consensus forecast. A reading above 50 indicates a positive housing market for new single-family dwellings.

Forecasts ranged from a low 82 to a high of 87. The consensus forecast was 85, indicating the continued climb was again stronger than economists expected. The HMI now stands at its highest reading in the 35-year history of the series, exceeding the records set in both September and October, which surpassed the previous record set in December 1998.

“Historically low mortgage rates, favorable demographics and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17% in 2020 on a year-to-date basis,” said NAHB Chairman Chuck Fowke. “Though builders continue to sign sales contracts at a solid pace, lot and material availability is holding back some building activity.”

“Looking ahead to next year, regulatory policy risk will be a key concern given these supply-side constraints.”

Worth noting, 69% of the responses were gathered before the election for president was called by the media on November 7. The election results, and their future impacts on housing market conditions, will be more fully reflected in December’s HMI report.

The NAHB/Wells Fargo HMI is derived from a monthly survey that NAHB has been conducting for 30 years. It measures builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

“Another record high for the HMI reflects that housing is a bright spot for the economy,” said NAHB Chief Economist Robert Dietz. “However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front.”

“In the short run, the shift of housing demand to lower density markets such as suburbs and exurbs with ongoing low resale inventory levels is supporting demand for home building.”

The HMI index gauging current sales conditions increased six points to 96, while the component measuring sales expectations in the next six months ticked one point higher to 89. The measure charting traffic of prospective buyers gained three points to 77.

All three are the highest levels ever measured.

For the three-month moving averages for regional HMI indices, the Northeast gained two points to 83, the Midwest rose six points to 80, the South increased by four points to 86 and the West by four points to 94.