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“Positive Conditions” Leading to Strong Home Builder Confidence

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) found builder confidence in the newly-built single-family homes was just one point lower to 70 in November. 

The past two months have had the highest sentiment levels in 2019. 

“Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” the report states. “In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.” 

NAHB states there have been substantial annual improvements following housing affordability issues in 2018 when the HMI was 60. Lot shortages, however, remain an issue for custom builders, as they struggle with affordability concerns, lack of labor, and regulatory constraints. 

The Northeast posted a two-point gain in builder confidence to 62, the West’s sentiment increased to 81, the South rose one point to 74, and the Midwest was unchanged at 58. All regions posted year-over-year increases. 

Redfin reported earlier this month that although the sale prices for new homes fell 1.5% from 2018, new-home sales rose 5.6%. 

Home-sale prices fell to a new average of $370,000 for Q3 2019—the biggest price decline since 2012 and the third consecutive quarter of declines. 

The new-home supply fell 7.9% annually, which is also the most significant inventory drop since 2012, and the second straight quarter of declines.  Prices for existing homes rose 4.2% from 2018, while sales increased by 2.1%. The supply of existing homes fell by 6.9%. 

Redfin stats the 10% year-over-year rise in residential building permits could signal the start of a “moderate recovery” for the new-home market. 

"Buyers are returning to the new-home market thanks to low mortgage rates and relatively low prices," said Redfin Chief Economist Daryl Fairweather. "And builders, also taking advantage of low-interest rates to fund projects, are paying attention to preferences for affordability, which has led to more sales. Residential construction was a bright spot in the economy in the third quarter, a sign that builders are working to fill an inventory gap. As we head into the new year, I expect more new-home listings to hit the market, which should help sustain the relatively high level of sales."

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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