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Builder Confidence Approaching Highest Levels Since Recession

Nov 17, 2017

According to the latest NAHB//Wells Fargo Housing Market Index (HMI), builder confidence improved for the second month in a row this month after taking a dip in September because of the hurricanes that hit the country during the later summer months. The index measures confidence levels among the Association’s new home builder members when it comes to the market for new homes.

The HMI increased from 68 in October to 70 in November, reaching its best score since March. This was also the second-highest level for the index since July 2005.

NAHB Chairman Granger MacDonald said: "November's builder confidence reading is close to a post-recession high - a strong indicator that the housing market continues to grow steadily. However, our members still face supply-side constraints, such as lot and labor shortages and ongoing building material price increases."

In its regular monthly survey, which it has been conducting since the late 1980s, the NAHB asks builders to rate their views of present single-family residential property sales and what they expect these sales to be over the next half-year as either “poor”, “fair”, or “good”.

The poll also asks builders to rate prospective buyer traffic as “low to very low”, “average”, or “high to very high”. Using these scores, the NAHB then makes the necessary seasonal adjustments before calculating the final index figure. A reading of more than 50 shows that the majority of builders view conditions as good.

In November, two of the three components that form part of the HMI recorded 2-point improvements. The component that measures future outlook for the next six months dropped 1 point to 77. The one that measures buyer traffic improved 2 points to 50, while the component measuring present sales conditions improved to 77.

For individual areas, the HMI scores use three-month moving averages. Here, the South improved 1 point from 68 to 69, the Northeast surged 5 points from 49 to 54, and both the Midwest and the West stayed flat at 63 and 77, respectively.

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