November 18, 2024

This series rose 3 points in November to 46 after gaining 2 points in both September and October.  The November gain seems to reflect hope that the Trump administration will cut a lot of the red tape that has been impeding the housing industry.  Keep in mind that the breakeven point for this series is 50 so at 46 it is clear that builders are still being cautious  They are bothered by mortgage rates that at 6.8% are still relatively high.  They are also bothered by the inability to hire as many workers as they would like, by the relative scarcity of lots on which to build, and onerous local regulations.

NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas said, “With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments.  This is reflected in a huge jump in builder sales expectations over the next six months.”

Chief Economist Robert Dietz said, “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.  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.”

Traffic through the model homes rose 3 points in November to 32 after rising 2 points in both September and October.   Traffic through model homes remains low as still high mortgage rates are reducing the number of interested buyers.

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The homebuilders expectations index jumped 7 points in November to 64 after rising 4 points in both October and November.  This is the highest level in 2 years and reflects a hope that the Trump administration will alleviate much of the regulatory environment that has been impeding growth in the housing industry.

Mortgage rates are now hovering at the 6.8% mark which is relatively expensive. Both potential home buyers and builders expect them to decline further as 2025 progresses given the continuing slowdown in inflation and likely rate reductions by the Federal Reserve.

Home prices rose sharply for almost two years from mid-2020 through the spring of last year.  They then fell for eight consecutive months.  An acute shortage of homes available for sale has caused prices to climb again in recent months  Builders lack of enthusiasm is likely to translate into only a small increase in housing starts in the months ahead.

If home prices are relatively steady, the economy continues to crank out jobs, wages rise, and mortgage rates gradually decline to the 5.8% mark, housing affordability should increase considerably by the end of next year.

We expect GDP growth to be 2.5% in the fourth quarter and roughly similar growth in 2025.

Stephen Slifer

NumberNomics

Charleston, SC