Homebuilder Sentiment Eases for First Time in 5 Months

Homebuilder sentiment in the U.S. eased in November for the first time in five months while holding close to the highest level since February 2018.

The National Association of Home Builders/Wells Fargo Housing Market Index edged down 1 point to 70 as sales and traffic of prospective buyers cooled, according to data released Monday. The group’s gauge of builder optimism about sales over the next six months advanced to the highest since May 2018.

Key Insights

• A downturn in sentiment among builders in the South, the largest U.S. region, was responsible for the November decrease. While low borrowing costs and a sturdy job market continue to fuel demand, smaller builders remain constrained by lot availability and difficulty finding skilled labor, NAHB says.
• The average rate on a 30-year fixed mortgage crept up to 3.75% last week, according to Freddie Mac data, after falling in September to an almost three-year low of 3.49%. The Federal Reserve has lowered its benchmark rate three times in the second half of the year.
• Home sales have improved markedly from last year when affordability issues suppressed demand. The latest government data showed purchases of new properties remain close to an almost 12-year high.
• The South posted the lone decline among four regions. The reading for the West climbed to the highest level since 2016.
• The index of present sales fell 2 points to 76 while the future sales measure rose 1 point to 77. The buyer traffic gauge slipped slipped 1 point to 53.
• Readings above 50 indicate more builders view conditions as good than poor.

Official’s View

“We have seen substantial year-over-year improvement following the housing affordability crunch of late 2018, when the HMI stood at 60,” Robert Dietz, NAHB’s chief economist, said in a statement. “However, lot shortages remain a serious problem, particularly among custom builders. Builders also continue to grapple with other affordability headwinds, including a lack of labor and regulatory constraints.”