Monday, November 19, 2018

NAHB: Builder Confidence Declines in November

by Bill McBride on 11/19/2018 10:05:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 60 in November, down from 68 in October. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Drops as Housing Affordability Issues Rise

Growing affordability concerns resulted in builder confidence in the market for newly-built single-family homes falling eight points to 60 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Despite the sharp drop, builder sentiment still remains in positive territory.

“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.

“For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” said NAHB Chief Economist Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”

With the prospect of future interest rate hikes in store, Dietz said that builders have adopted a more cautious approach to market conditions and urged policymakers to take note.

“Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” said Dietz. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.”
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All of the major HMI indices posted declines. The index measuring current sales conditions fell seven points to 67, the component gauging expectations in the next six months dropped 10 points to 65 and the metric charting buyer traffic registered an eight-point drop to 45.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 58. The Midwest edged one point lower to 57, the South declined two points to 68 and the West dropped three points to 71.
emphasis added
NAHB HMI Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was well below the consensus forecast, but still a decent reading.