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Builder confidence held back by appraisals, building costs

Builder confidence has improved this year, but recent housing hiccups are holding the new home construction sector back.

new home construction

new home construction

Builder confidence in the housing market

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, homebuilder confidence remained unchanged in November from October, hitting a reading of 54 after the October figure was revised downward from 55 to 54. The NAHB report has indicated slowly improving builder confidence, but political uncertainty tempered the index’s growth.

“Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road,” said NAHB Chairman Rick Judson.

Positive and negative news

Judson added that low appraisals and still rising construction costs took a toll on confidence as well, but the index remains over 50 for the sixth consecutive month – any reading over 50 means more builders feel positively about the market than negatively.

“The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline,” NAHB Chief Economist David Crowe noted.

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Meanwhile, housing has seen hiccups in recovery, as a long period of historically low interest rates ends and rates rise, now hitting a two year high.

Regional performance varied

The HMI index gauging current sales conditions in November held steady at 58. The component measuring expectations for future sales fell one point to 60 and the component gauging traffic of prospective buyers dropped one point to 42.

The HMI three-month moving average was mixed in the four regions. No movement was recorded in the South or West, which held unchanged at 56 and 60, respectively. The Northeast recorded a one-point gain to 39 and the Midwest fell three points to 60.

Regionally, the Midwest saw the biggest dip in confidence, falling to 54 points from 62 in October, meanwhile builders in the Northeast improved, rising from 30 to 44 – still low in comparison to other areas.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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