Friday, 14 of December of 2018

Economics. Explained.  

Homebuilder Confidence

November 19, 2018

Homebuilder confidence plunged 8 points in November to 60 after having risen 1 point in October.  It is clear that rising mortgage rates are weighing on homebuilder confidence.  But at a level of 60 it still means that builder confidence is positive, just less positive than it was in the previous month.

NAHB Chairman Randy Noel said, “Builders report that they continue to see signs of consumer demand for new homes, but that customers are taking a pause due to concerns over rising interest rates and home prices,”

NAHB Chief Economist Robert Dietz said  “For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction.  Rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”

Traffic through the model homes dropped 8 points in November to 45 after having jumped 4 points in October.  Traffic through model homes has slipped somewhat in recent months as potential homebuyers have become cautious about rising mortgage rates.  The volatility in the stock since early October may also be taking a toll on buyer confidence.

Not surprisingly there is a fairly close correlation between builder confidence and housing starts.  Confidence took a big hit in November while housing starts have been fairly flat for most of this year.

However, builders have many units that have been authorized but not yet started.  In fact, the authorized but not yet started units are the highest they have been in a decade.  Our sense is that as labor slowly becomes available builders will continue building new homes.  Thus, we look for starts to climb about 4% next year.

Stephen Slifer

NumberNomics

Charleston, SC


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