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Builder Confidence Surpasses Expectations in November

Builder confidence continued its march to ""break-even,"" with the Housing Market Index (HMI) climbing five points in November to 46--its highest level since May 2006--the ""National Association of Home Builders"":http://www.nahb.org/news_details.aspx?newsID=15597 (NAHB) reported Monday. Economists had expected the index to edge up one point to 42.


The HMI survey was conducted in the two weeks immediately following Hurricane Sandy and therefore reflects builder sentiment during that period.

The November boost was due primarily to a surge in current sale activity--which should be reflected in the government's new homes sales report to be issued next week--which rose from an index level of 41 (revised down from an originally reported 42) in October to 49 in November. The current sales index is at its highest level since March 2006.

The upward assessment of homebuyer activity followed a five-point boost in buyer traffic in October.


The traffic index remained at 35 in November, and the outlook for sales six month out rose by two points to 53 in November--its highest level since February 2007.

The overall index is up 27 points in the last year, the strongest year-over-year gain in its almost 28-year history. The current sales index has risen 29 points in the last year, also a record. The traffic measure also registered a record year-year gain (21 points), while the index for the sales outlook is up 28 points year-over-year, shy of the 34-point record for an annual gain.

That the overall index and two of its three components are showing record annual increases underscores the depths of the housing recession.

The HMI, considered a measure of builder confidence, could be reflected in permits and starts data reported for November. That report from the Census Bureau will be issued in December.

The index, built based on surveys conducted jointly by the NAHB and ""Wells Fargo"":https://www.wellsfargo.com/, 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 from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. The overall index has been under 50 since April 2006, 79 straight months.

All four regions of the country posted gains in their HMI three-month moving averages as of November. The South posted a four-point gain to 43, while the Midwest and West each posted three-point gains, to 45 and 47, respectively, and the Northeast posted a two-point gain to 31.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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