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Builders are almost giddy. An Index of 50 suggests a balance between optimism and pessimism, but Nov.’s confidence number hit 90 after a record-breaking 85 in Oct.

WASHINGTON – Calling it “another sign that housing continues to lead the economy forward,” builder market confidence for newly-built single-family homes increased five points to 90 in November. It shattered the previous record of 85 set in October, according to the latest NAHB/Wells Fargo Housing Market Index (HMI).

Builder confidence levels hit successive all-time highs in each of the past three months.

“Historically low mortgage rates, favorable demographics and an ongoing suburban shift for homebuyer preferences have spurred demand and increased new home sales by nearly 17% in 2020 on a year-to-date basis,” says 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.”

“Another record high for the HMI reflects that housing is a bright spot for the economy,” adds 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.”

NAHB adds one caveat to the November report: 69% of the builders’ responses for this survey arrived before the media called the election for president on Nov. 7. Attitudes about the election results will be more fully reflected in December’s HMI report.

All HMI indices posted their highest readings ever in November. The HMI index gauging current sales conditions rose six points to 96, the component measuring sales expectations in the next six months increased one point to 89, and the measure charting traffic of prospective buyers rose three points to 77.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 83, the Midwest jumped six points to 80, the South rose four points to 86 and the West increased four points to 94.

Derived from a monthly survey that NAHB has been conducting for 35 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.

By Kerry Smith 

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