After some very positive months, builder confidence took a step back in November

Builder confidence in the market for newly constructed single-family homes slipped three points to 62 from October to November in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Tom Woods, the NAHB’s chairman, emphasized that even with November’s decline, builder confidence remains in positive territory.

“Even with this month’s drop, builder confidence has remained in the 60s for six straight months — a sign that the single-family housing market is making long-term headway,” Woods said. “However, our members continue to voice concerns about the availability of lots and labor.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Builder Confidence in November

Two of the three HMI components posted losses in November. The index measuring sales expectations in the next six months fell five points to 70, and the component gauging current sales conditions decreased three points to 67. Meanwhile, the index charting buyer traffic rose one point to 48.

Looking at the three-month moving averages for regional HMI scores, the West increased four points to 73 while the Northeast rose three points to 50. Meanwhile the Midwest and South held steady at 60 and 65, respectively.

David Crowe, the NAHB’s chief economist, said that October was an atypically strong month, and thus November’s HMI was bound to decline – though the future remains bright.

“The November report is pullback from an unusually high October, and is more in line with the consistent, modest growth that we have seen throughout the year,” Crowe said. “A firming economy, continued job creation and affordable mortgage rates should keep housing on an upward trajectory as we approach 2016.”