Photo: James Bombales
Business is booming for the nation’s homebuilders. The National Association of Home Builders’ Wells Fargo Housing Market Index (HMI), which measures confidence in the new construction single-family homes market, increased by five points to a reading of 90 in November.
This was the highest score ever logged in the index’s 35-year history, shattering the previous record of 85, which was set in October 2020. A year ago, sentiment stood at 71, although any number over 50 is generally considered to be positive.
“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 percent in 2020 on a year-to-date basis,” said NAHB Chairman Chuck Fowke.
Each index measurement posted an all-time high — current sales conditions rose six points to 96, sales expectations in the next six months inched up one point to 89, and prospective buyer traffic improved by three points to 77.
When broken down by region, homebuilders in the West were the most confident with a three-month moving average of 94, followed by the South at 86, the Northeast at 83 and the Midwest at 80.
“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.”
The majority of responses (69 percent) were received prior to the US presidential election on November 3rd, therefore, President-elect Joe Biden’s win will not be reflected in the HMI until next month.
Dietz noted that in the short-term, the market will continue to experience high demand for low-rise housing types, especially in the suburbs and exurbs. Where things will stand a year from now depends on the regulatory policies adopted by the incoming administration as well as “lot and material availability,” which have been constrained amid the ongoing pandemic, added Fowke.