More Housing Coming? Home Builder Confidence Grows for Third Straight Month

Home builders are feeling optimistic

The supply of for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.

Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?

It’s beginning to look like it, as a leading indicator of housing inventory has moved upwards for three straight months, reaching the highest point since April.

Home Builder confidence improves

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In November, builder confidence hit a score of 46, up from 43 in October and 34 in November 2023. The index also reached its highest point since April 2024.

“While builder confidence is improving, the industry still faces many headwinds such as an ongoing shortage of labor and buildable lots along with elevated building material prices,” said NAHB Chief Economist Robert Dietz. “Moreover, while the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates. There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.”

All three index components experienced monthly gains as well. Current sales rose to 49 from 47, sales in the next six months went to 64 from 57, and prospective home buyer traffic increased to 32 from 29.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 55. Next came an HMI of 44 in the Midwest, 42 in the South, and 41 in the West.

What other indicators of housing inventory say

In October, active home listings increased 29.2% annually, reaching the highest level since December 2019, according to Realtor.com.

Among the 50 largest cities in the U.S., San Diego saw a 63.3% yearly jump in active listing count, trailed by 60.5% in Seattle and 59.5% in Denver. Las Vegas experienced the smallest annual gain of 4.2%, followed by 7.9% in Milwaukee and 9.6% in St. Louis.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report, with three leading indicators of housing inventory.

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.416 million in October. That figure declined 0.6% month-over-month and 7.7% year-over-year.

Next, housing starts reached a SAAR of 1.311 million, down 3.1% monthly and 4% annually. Lastly, a SAAR 1.614 million houses were completed in October, 4.4% lower than September but 16.8% above October 2023.

“Further interest rate cuts from the Federal Reserve through 2025 should result in lower interest rates for construction and development loans, helping to lead to a stabilization for apartment construction and expansion for single-family home building,” Dietz said.

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.