National index reveals record-breaking homebuilder confidence

In a sign of increasing confidence in the construction market, the National Association of Home Builders’ Wells Fargo Housing Market Index – a measure of builder sentiment – rose to 90 in November, the highest score ever recorded in the 35-year history of the index.

To put the measure in context, throughout the years that the index has been compiled it has only reached or topped 80 three times, the NAHB said. Scores above 50 are considered positive. In April, as the pandemic took hold, builder confidence plunged to 30.

Regionally, builder confidence in the Northeast rose two points to 83. Builders in the West expressed the greatest confidence, with the index there jumping four points, to 96. The South also climbed four points to 86. The Midwest increased six points to 75.

Of the index’s three components, current sales conditions rose 6 points to 96. Sales expectations in the next six months increased 1 point to 89 and buyer traffic rose 3 points to 77.

Much of the confidence stems from continued historically low mortgage rates and an extremely hot housing market. And it comes in the face of concerns in the cost and supply of building materials as well as available property for constructing new homes.

The record-high index “reflects that housing is a bright spot for the economy,” said the NAHB’s 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 NAHB pointed out that 69% of the responses for the November survey were received before the election results. 7, so their impact on builder sentiment won’t be reflected until the December report.