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27 Sep, Wednesday
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Bull Trader USA

Economic Report: Home builders are growing more confident as Americans demand more housing

The numbers: Home builder sentiment improves

Home builders grew more confident this month, as demand for housing remained strong, in spite of the continued pressures from supply-chain backlogs and labor shortages.

The National Association of Home Builders’ monthly confidence index rose three points to a reading of 83 in November, the trade group said Tuesday. It represents the highest level for the index since May.

What happened

Two of the three gauges that underpin the overall builder confidence index also experienced three-point increases, including the index that measures current sales conditions and the component that tracks traffic of prospective buyers. The gauge that assesses sales expectations for the next six months remained unchanged from the previous month.

Regionally, every part of the country experienced a monthly increase in confidence among home builders except the Northeast, where confidence waned.

The big picture

To get a sense of how high housing demand, look no further than the latest inflation figures for the cost of housing. Home prices and rents alike are both increasing at the fastest pace in years. That price appreciation is a reflection of the shortage of housing nationwide.

That shortage has worsened in recent years because home-building did not keep pace with the formation of new households. The improving confidence among home-builders isn’t necessarily translating in a higher pace of construction though.

“We’re still seeing come conflicting signals in the market,” Jonathan Kanarek, managing director at BuildFax, said in a report the property data company released Tuesday. “While home-builder confidence is high, new construction has slowed in recent months as acute labor shortages and expensive building material costs continue to strain the industry.”

Another factor constraining home-builders ability to construct new houses is a shortage of available lots.

“Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions,” Robert Dietz, chief economist at the National Association of Home Builders, said in the organization’s report. “Policymakers need to focus on resolving these issues to help builders produce more housing to meet strong market demand.”

Market reaction

Home-builder stocks, including Lennar Corp.

Toll Brothers Inc.

D.R. Horton Inc.,

and PulteGroup Inc.

all posted gains in excess of the increases seen with the S&P 500 Index

and the Dow Jones Industrial Average

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