Home Builder Confidence Index Surges to Another Record High in November

Builder optimism is skyrocketing heading into the end of the year.

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The National Association of Home Builders/Wells Fargo Housing Market Index surged to an all-time high in November, climbing five points month-to-month to a score of 90. It marked the third consecutive month the HMI, which gauges builder perceptions of the current single-family housing market, reached a record high, thanks to highly favorable conditions in market.

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“Historically low mortgage rates, favorable demographics and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17 percent in 2020 on a year-to-date basis,” said Chuck Fowke, NAHB chairman.

This has been a tumultuous year for the home building industry, and the HMI has largely reflected that. April and May saw massive drop-offs in builder optimism that resulted in HMI scores in the 30’s, following the unprecedented economic and societal impact of the coronavirus pandemic. As the economy began to recover over the summer, the HMI did as well, gradually rising back into the 50’s and 60’s before spiking this fall.

“Though builders continue to sign sales contracts at a solid pace, lot and material availability is holding back some building activity,” Fowke said. “Looking ahead to next year, regulatory policy risk will be a key concern given these supply-side constraints.”

Regionally, builder confidence was highest in the West where the HMI climbed all the way up to 98. The other three regions were slightly more tempered in the their optimism, with the South, Midwest, and Northeast posting scores of 90, 85, and 82, respectively.

“Another record high for the HMI reflects that housing is a bright spot for the economy,” said NAHB Chief Economist Robert Dietz. “However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front.

“In the short run, the shift of housing demand to lower density markets such as suburbs and exurbs with ongoing low resale inventory levels is supporting demand for home building.”