Builder confidence is up, according to the latest report from the National Association of Home Builders (NAHB). With election uncertainty in the rearview mirror, builders are optimistic about the future, citing regulatory relief and a demand-driven market.
Let’s take a look.
Why Builders Are Feeling Good
The NAHB/Wells Fargo Housing Market Index (HMI) shows builder sentiment for newly-built single-family homes rose three points in November, reaching a score of 46. Builders are betting big on post-election regulatory relief, with expectations for increased housing starts and more manageable costs.
“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. This is reflected in a huge jump in builder sales expectations over the next six months.”
October data from the U.S. Census Bureau shows that single-family housing authorizations reflect that optimism, rising slightly to a rate of 968,000—up 0.5% from September. Yet, overall housing starts fell 3.1% month-over-month to 1,311,000, and single-family completions dropped 1.4% to 986,000.
Builders are working to keep up with the demand—and especially to increase affordable inventory. However, it will take time, along with some regulatory changes, to boost the supply needed.
When Optimism Meets Reality
Census Bureau data also shows that single-family housing starts fell nearly 7% from the previous month, highlighting the difficulties of keeping pace with market demand. Coupled with labor shortages, material costs, and limited buildable lots, builders are under pressure to deliver.
“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. 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.”
