Builders more optimistic about home sales post-election
The construction industry expects the new administration to loosen regulations, which could boost sales, though other challenges remain.
After bottoming out in August, builder confidence has risen steadily this fall. That trend is expected to continue now that the presidential election is over, giving the industry more certainty about what to expect in 2025 and beyond.
The NAHB/Wells Fargo Housing Market Index, which tracks the single-family home market, rose three points to 46 in November. It was the third straight month of improving sentiment, and the outlook for the next six months was especially positive.
'Regulatory relief' expected: "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," said National Association of Home Builders Chairman Carl Harris in a news release.
"This is reflected in a huge jump in builder sales expectations over the next six months."
The index looks at three measures, all of which increased in the latest survey: Current sales conditions (up two points), six-months sales outlook (up seven points to 64), and prospective buyer traffic (up three points).
Tariffs, labor shortages and other challenges: While looser regulations would be a boon for builders, some other areas could be a cause for concern as the new administration takes over. One risk factor is the tariffs Trump is expected to pursue once in office, which could increase the cost of building supplies. About 10% of construction materials are imported into the U.S., said Robert Dietz, chief economist at the NAHB.
The industry has also grappled with labor shortages, which could be further exacerbated by changes in immigration policies, while the specter of higher inflation and interest rates continues to loom.
"The housing market faces a complicated mix of upside and downside risks as policy shifts in Washington," Dietz said in an email, adding that the NAHB will have more analysis on the impact of imports and tariffs in the coming weeks.
Price cuts hold steady: Many home builders continue to cut prices as affordability issues weigh on all sectors of the housing industry. NAHB found that 31% of builders surveyed reduced prices in November, which is mostly unchanged since July. The average price reduction was 5%, while 60% of builders used sales incentives to close the deal.
Regional differences: Using three-month averages for regional scores, the NAHB found that builders in the Northeast were the most confident, posting an index score of 55. The Midwest index rose three points to 44, the South went up one point to 42, and the West was unchanged at 41.