Dive Brief:
- Builder confidence jumped two points to a reading of 70 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index in November, representing its highest levels since March and its second-highest level since July 2005, according to the NAHB.
- Two of the index's three sub-indices registered gains for the month, with current sales conditions rising two points to a reading of 77 and buyer traffic notching up two points to 50. The index measuring sales expectations for the next six months edged down one point to 77.
- The positive reading, according to NAHB chair Granger MacDonald, was driven by job and economic expansion, growing homeownership rates and a shortage of available housing stock.
Dive Insight:
Though supply-side challenges continue to hamper builders, confidence in the market is expected to hold through the remainder of the year.
The month's reading likely got a boost from strengthened rebuilding efforts across the South following the region's recent bout of hurricanes. While those efforts have helped lift confidence in the market for new single-family housing, the extent of rebuilding needed in the region has been a strain on material prices and labor availability.
Construction labor is more strained today than it was following Hurricane Katrina. Even before the storms, 70% of contractors had reported challenges in finding enough skilled workers. Despite driving October's employment growth, residential builders have a growing cause for concern in the sector's struggle to recruit qualified employees.
Builders, however, got a small break in October with material prices remaining unchanged on a month-over-month basis. While some of those prices are up substantially from the same period in 2016, the Associated Builders and Contractors notes that the reprieve will likely allow for planned construction projects to continue.
Still, the volatile nature of the housing market could be a drag on builder confidence. Housing starts reached a one-year low in September — in large part, due to disruption from Hurricanes Irma and Harvey — with the Commerce Department also recording a decline in building permit authorizations, a measure of future growth.
October's housing starts report, released Friday, will provide greater clarity about present and future residential building activity.