Home builders

Homebuilders Growing Confidence as Americans Call for More Housing

The Numbers: Homebuilder Sentiment Improves

Homebuilders have grown more confident this month as housing demand has remained strong, despite continued pressures from supply chain backlogs and labor shortages.

The National Association of Home Builders’ monthly confidence index rose three points to 83 in November, the professional group said on Tuesday. This is the index’s highest level since May.

What happened

Two of the three indicators that underpin the overall Builder Confidence Index also saw three point increases, including the index that measures current selling conditions and the component that tracks traffic from potential buyers. The gauge that assesses sales forecasts for the next six months has remained unchanged from the previous month.

Regionally, all regions of the country experienced a monthly increase in homebuilder confidence, with the exception of the North East, where confidence declined.

The big picture

To get a feel for the strong demand for housing, look no further than the latest housing cost inflation figures. House prices and rents are both rising at the fastest rate in years. This price appreciation reflects the nationwide housing shortage.

This shortage has worsened in recent years because housing construction has not kept pace with the formation of new households. However, improving homebuilders’ confidence does not necessarily translate into a higher pace of construction.

“We always see mixed signals coming in the market,” said Jonathan Kanarek, chief executive of BuildFax, in a report released Tuesday by the real estate data company. “While homebuilder confidence is high, new construction has slowed in recent months as acute labor shortages and high building material costs continue to strain the industry. “

Another factor limiting the ability of home builders to build new homes is the lack of available land.

“Lot availability is at its lowest for several decades and the construction industry currently has over 330,000 open positions,” said Robert Dietz, chief economist for the National Association of Home Builders, in the report. organization. “Policymakers need to focus on solving these problems to help builders produce more homes to meet strong market demand. “

Market reaction

Shares of home builders, including Lennar Corp. LEN,
Toll Brothers Inc. TOL,
DR Horton Inc., DHI,
and PulteGroup Inc. PHM,
all posted higher gains than the increases observed with the S&P 500 SPX index,
and the Dow Jones Industrial Average DJIA,