After falling five points in October, builder confidence in the market for newly built single-family homes recovered most of that ground in November, rising four points to reach an index score of 58 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
‘Growing confidence among consumers is what's fueling this optimism among builders,’ says Kevin Kelly, chairman of NAHB, in a release. ‘Members in many areas of the country continue to see increasing buyer traffic and signed contracts.’
‘Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,’ adds David Crowe, chief economist for the NAHB. ‘After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.’
Of the three components that comprise the report, the index gauging current sales conditions rose five points to 62, while the index measuring expectations for future sales moved up two points to 66 and the index gauging traffic of prospective buyers increased four points to 45.
One reason builder confidence improved is that home prices are starting to stabilize. Earlier this month, NAHB reported that housing affordability decreased slightly in the third quarter. According to the group's Housing Opportunity Index, 61.8% of new and existing homes sold between the beginning of July and the end of September were ‘affordable’ to families earning the U.S. median income of $63,900. This is down from the 62.6% in the second quarter.
The national median home price increased to $221,000 in the third quarter, up from $214,000 in the second quarter. Meanwhile, average mortgage interest rates decreased from 4.44% to 4.35% in the same period.
‘Low mortgage rates, strong job growth and affordable home prices make this a good time to buy a home,’ Kelly says.
‘Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards,’ adds Crowe. ‘Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year.’