NAHB: Despite Challenges, Builders Remain Confident In New Homes Market

Although home builders are hard-pressed to find good skilled labor in most areas of the country – and although the cost of construction materials continues to rise – most continue to have confidence in the market for new, residential homes. That's because the inventory of new homes is currently tight, yet demand from home shoppers for new construction remains high.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single-family homes was unchanged in November compared to October.

For six consecutive months, a majority of home builders surveyed view market conditions as ‘good,’ as opposed ‘fair’ or ‘poor,’ the NAHB reports.

‘Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road,’ says Rick Judson, chairman of the NAHB, in a release. ‘Meanwhile, builders continue to face challenges related to rising construction costs and low appraisals.’

‘Policy and economic uncertainty is undermining consumer confidence,’ adds David Crowe, chief economist for the NAHB. ‘The fact that builder confidence remains above 50 [on the index] is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.’

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 from 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.

So far in November, the index gauging current sales conditions has held steady at 58. The component measuring expectations for future sales fell one point to 60, and the component gauging traffic of prospective buyers dropped one point to 42.

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