WASHINGTON, DC—Builder confidence in the market for newly-built single-family homes has hit an eight-month high, the National Association of Home Builders said Thursday. National Association of Home Builders/Wells Fargo Housing Market Index rose two points to reach 70 for November, the second-highest level on record since July 2005.

“Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory,” says Robert Dietz, chief economist with NAHB. “With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017.”

The association's chairman, Granger McDonald, who's also chairman and CEO of Kerrville, TX-based builder MacDonald Cos., says November's builder conference 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.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of the three HMI components registered gains in November: the component gauging current sales conditions, which rose two points to 77; and the index measuring buyer traffic, which increased two points to 50. Meanwhile, the index charting sales expectations in the next six months dropped a single point to 77.

Earlier this month, NAHB reported that markets in 197 of the 337 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the third quarter, according to the association's Leading Market Index produced in partnership with First American Title Insurance Co. The LMI's nationwide score inched up to 1.03, meaning that based on current permit, price and employment data, the nationwide average is running at 103% of normal economic and housing activity. Meanwhile, 84% of markets have shown an improvement year over year, according to NAHB.

That being the case, NAHB said earlier this month that individual components of the LMI are at different stages of recovery. While employment has reached 99% of normal activity and home price levels are well above normal at 155%, single-family permitting is running at just 56% of normal activity.

Instant Insights /

Builder Confidence Hits 8-Month High

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