The National Association of Home Builders (NAHB) and Wells Fargo said that the Housing Market Index (HMI) was unchanged in November. The HMI held flat in November at 54, down from 58 in August and 57 in September. NAHB Chief Economist David Crowe added, “Policy and economic uncertainty is undermining consumer confidence.” As such, the level of optimism among home builders has slowed somewhat over the past few months, with higher mortgage rates also a contributing factor.
On the positive side, though, it was the sixth consecutive month with the HMI above the threshold of 50, the level at which more builders were optimistic than pessimistic in their outlook. Indeed, the longer-term trend for builder confidence is more upbeat, with the HMI up from 19 in November 2011 and 45 in November 2012. Indeed, the 58 reading of August was the highest level of sentiment among builders since November 2005, with respondents not far from that level despite the recent easing.
The November data were somewhat mixed, with weaker builder confidence in the Midwest and West outweighing strength in the Northeast and South. While the traffic of potential buyers has decelerated at bit, those builders taking the survey still expect relatively strong single-family sales over the next six months (down from 68 in August to 61 in October to 60 in November).
With the recent government shutdown, it has been a while since we have received housing starts and permits data from the Census Bureau. In fact, the most recent data were released on September 18, with a new report slated to come out next week on November 26. The consensus estimate for October housing starts is around 910,000, which would be a slight improvement over August’s 891,000 figure. Yet, this would still be below the one million mark achieved in March.
Home buyers are getting used to the “new normal” in terms of borrowing costs, and once Americans move past their “sticker shock” of higher rates, the housing market should stabilize and begin to expand again. Freddie Mac said that the average 30-year mortgage rate in the last week of October was 4.10 percent. This was better than 4.57 percent observed during the week of September 12 (before the Federal Reserve decided not to taper its asset purchases as expected), but it was still higher than the 3.35 percent average recorded during the first week of May. The average 30-year mortgage rate last week was 4.35 percent.
Chad Moutray is the chief economist, National Association of Manufacturers.