NAHB Housing Market Index: Builder Confidence Down Again

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. The data is collected from a monthly survey of about 900 home builders asking respondents to, "rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes." It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.

The latest reading fell 6 points from last month to 34, the index's 4th consecutive monthly decline and its lowest level since December 2022. Builder confidence continued to weaken in November as a result from rising mortgage rates nearing 8% however recent macroeconomic data suggest improved conditions in the coming months.

Here's an excerpt from the press release:

“The rise in interest rates since the end of August has dampened builder views of market conditions, as a large number of prospective buyers were priced out of the market,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “Moreover, higher short-term interest rates have increased the cost of financing for home builders and land developers, adding another headwind for housing supply in a market low on resale inventory. While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building, thereby allowing more attainable housing supply to the market.”

“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” said NAHB Chief Economist Robert Dietz. “In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%. Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December.”

Here is the historical series, which dates from 1985.

NAHB Housing Market Index

Components of the the NAHB Housing Market Index

The NAHB Housing Market Index is calculated based off of three components: current sales, expected sales in the next 6 months, and traffic of prospective buyers. In November, all three posted declines for a 4th straight month with the current sales component dropping to 40, the expected sales component falling to 39, and the traffic component decreasing to 21.

Housing Market Index: Regional Breakdown

The chart below gives a regional breakdown of the NAHB HMI in four regions of the country: Northeast, Midwest, South, and West. The Northeast was the sole region that showed improvement from October, increasing 7 points to 53. Meanwhile, the Midwest, South, and West fell for a 4th straight month to 32, 35, and 28, respectively.

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