Builder confidence for newly built single-family homes has hit a 12-year high, partly due to optimism inspired by expectations about what President Donald Trump will mean for the industry, according to the National Association of Home Builders.
The NAHB/Wells Fargo Housing Market Index suggested that builder confidence in the market jumped six points to a level of 71, the highest reading the indicator has shown since June 2005.
Granger MacDonald, chairman of NAHB, credited Trump for the gains.
“Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting,” MacDonald said in a written statement.
Others cautioned that the confidence indicator is likely to level off in coming months. Robert Dietz, chief economist at NAHB, predicted that rising material prices, higher mortgage rates and a shortage of lots and skilled labor will all exert a sobering effect.
The index uses data from a monthly survey that the home builders group has conducted for the past three decades. It is used to gauge expectations for single-family home sales for the next six months. The survey also asks builders to estimate how much interest they are seeing from prospective buyers. The responses are then used to calculate a seasonally adjusted index. Any number above 50 suggests that a majority of the respondents had a favorable outlook for the market.
Even as the overall index showed gains, so did specific components. The component gauging current sales conditions, for instance, increased seven points to 78. And the index charting sales expectations over the next six months rose five points to 78. Similarly, the component measuring buyer traffic rose eight points to 54.