Confidence among U.S. homebuilders rose to a seven-month high in November, boosted by a rise in sales expectations and optimism that a Trump administration will ease regulatory pressure.
A gauge of housing market conditions from the National Association of Home Builders and Wells Fargo rose 3 points to 46 this month, surpassing all estimates in a Bloomberg survey of economists.
READ ALSO:
All three components of the index rose, led by the six-month sales outlook, which rose 7 points to the highest level since April 2022, on hopes that the Republican victory in Washington will mean looser regulations and more construction. A measure of current sales improved to a six-month high and an index of potential buyer traffic reached its highest level since April.
Builders have blamed presidential election uncertainty for the recent slowdown in sales, along with mortgage rates rebounding after hitting a two-year low in September. NAHB chief economist Robert Dietz said the election of Donald Trump two weeks ago only alleviates some of the industry’s concerns.
“While the stock market cheered the election results, the bond market is concerned, as evidenced by a rise in long-term interest rates,” Dietz said in a statement. “There is also policy uncertainty for businesses and the housing market as the executive branch changes hands.”
READ ALSO:
Builders have used sales incentives, such as lowering customers’ mortgage rates, to spur demand amid limited competition from the existing housing market. The resale market is hampered by the so-called lock-in effect, where homeowners are unwilling to give up their current low mortgage rates and put their homes up for sale.
The combination of high prices and mortgage rates is also putting pressure on many potential buyers, contributing to the largest supply of new homes for sale since the Great Recession. While borrowing costs fell in September on expectations of Federal Reserve rate cuts, mortgage rates recovered after signs of persistent inflation.
“The volatility of interest rates combined with the general uncertainty of election season is leaving some near-term buyers on the sidelines,” Paul Romanowski, CEO of builder DR Horton Inc., said during an earnings call last month. “To help drive demand and address affordability issues, we continue to use incentives such as mortgage rate buybacks and have continued to launch and sell more of our smaller floor plans.”
According to the NAHB survey, 31% of builders reported lowering home prices to attract buyers. The average price reduction fell to 5% this month, while the share of builders using sales incentives fell slightly to 60%.
Among U.S. regions, sentiment among builders rose in the Northeast and Midwest, while it fell in the South and West.