Home Builders Confident Headed into 2017

December 18, 2016

      Home builders saw a significant boost in confidence after President-elect Donald Trump won the election, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

This increase brought builder sentiment up seven points to a level of 70, the index’s highest point since July 2005.

Just before the election, builder confidence held steady, holding the HMI level at 63.

“This notable rise in builder sentiment is largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability,” said NAHB Chairman Ed Brady, a home builder and developer.  “This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29% in the past five years.” 

Perhaps this is just the increase the industry needs to boost new home development for first-time buyers, something that First American Chief Economist Mark Fleming said will be a key player in 2017’s housing market.

“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” NAHB Chief Economist Robert Dietz said.

“The rise in the HMI is consistent with recent gains for the stock market and consumer confidence,” Dietz said. “At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the index 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 for 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.

All three components of the HMI increased in December. The component gauging current sales conditions increased seven points to 76, while the index measuring sales expectations in the next six months increased nine points to 78. The component measuring buyer traffic increased six points to 53, the first time it moved above 50 since October 2005.