US homebuilder sentiment reaches seven-month high after election

Builders have blamed uncertainty over the presidential election for restraining sales recently, along with mortgage rates that rebounded after hitting a two-year low in September. PHOTO: BLOOMBERG

Published Tue, Nov 19, 2024 · 12:05 AM

CONFIDENCE among US homebuilders advanced to a seven-month high in November on a jump in sales expectations and optimism a Trump administration will ease regulatory burdens.

A gauge of housing market conditions from the National Association of Home Builders (NAHB) and Wells Fargo climbed three points to 46 this month, exceeding all estimates in a Bloomberg survey of economists.

All three components of the index rose, led by the six-month sales outlook, which increased seven points to the highest level since April 2022. A measure of current sales improved to a six-month high and an index of prospective buyer traffic reached the highest level since April.

Builders have blamed uncertainty over the presidential election for restraining sales recently, along with mortgage rates that rebounded after hitting a two-year low in September. NAHB chief economist Robert Dietz said Donald Trump’s election two weeks ago only alleviates some of the industry’s worries.

“While the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates,” Dietz said in a statement. “There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.”

Builders have been using sales incentives, such as buying down customers’ mortgage rates, to help stoke demand amid limited competition from the existing-home market. The resale market has been hamstrung by the so-called lock-in effect, whereby homeowners are unwilling to give up their current low mortgage rates and list their homes for sale.

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The combination of high prices and mortgage rates is also squeezing many prospective buyers, contributing to the biggest supply of new houses for sale since the Great Recession. While borrowing costs dropped in September on expectations of Federal Reserve interest-rate cuts, mortgage rates rebounded on signs of stubborn inflation.

“The volatility of rates combined with general uncertainty during the election season is causing some buyers to stay on the sidelines in the near term,” Paul Romanowski, chief executive of builder DR Horton, said on an earnings call last month. “To help spur demand and address affordability, we are continuing to use incentives such as mortgage rate buydowns and we have continued to start and sell more of our smaller floor plans.”

According to the NAHB survey, 31 per cent of builders reported cutting home prices to lure buyers. The average price reduction eased to 5 per cent this month, while the share of builders using sales incentives fell slightly to 60 per cent.