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Builder Confidence Moves Higher as Election Uncertainty is Lifted

According to the NAHB, builder sentiment improved for the third straight month and builders expect market conditions will continue to improve with Republicans winning control of the White House and Congress.

Builder confidence in the market for newly built single-family homes was 46 in November, up three points from October, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“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 the construction of more homes and apartments,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “This is reflected in a huge jump in builder sales expectations over the next six months.”

“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 result, 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.”

The latest HMI survey also revealed that 31% of builders cut home prices in November. This share has remained essentially unchanged since July, hovering between 31% and 33%. Meanwhile, the average price reduction was 5%, slightly below the 6% rate posted in October. The use of sales incentives was 60% in November, slightly down from 62% in October.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo 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.

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