US homebuilder sentiment rose to a seven-month high in November and expectations for sales in the next six months surged to the highest in about two-and-a-half years after a Republican election sweep fueled optimism for regulatory changes that could lead to more residential construction.
The National Association of Home Builders/Wells Fargo Housing Market Index rose to 46 this month, the highest since April, from 43 in October. The reading was higher than all 28 estimates in a poll of economists by Reuters, which had a median expectation for 43.
NAHB’s measures of current sales and traffic of potential buyers both ticked higher, while expectations for sales over the next six months shot up to the highest since April 2022.
“With the elections now in the rear view 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 NAHB Chairman Carl Harris, a custom homebuilder from Wichita, Kansas. “This is reflected in a huge jump in builder sales expectations over the next six months.”
The Nov. 5 election resulted in Republican control of the White House, with Donald Trump defeating Democrat Kamala Harris, and of both chambers of Congress. While Republicans have promised an aggressive deregulatory push, many of the rules affecting the building industry are determined at the state and local level – zoning laws in particular.
NAHB Chief Economist Robert Dietz also said that despite the improved sentiment, the industry still faces headwinds from labor shortages, a limited supply of building lots and elevated materials costs. Indeed, the construction industry is among the largest employers of immigrant workers, and Trump’s promises of a crackdown on immigration could further tighten the labor supply for the industry.
Moreover, the Federal Reserve may not lower interest rates as much as previously thought following recent data showing stickiness in inflation, and, in fact, mortgage rates have climbed sharply in the weeks since the central bank’s first rate cut in mid-September.
Residential construction has been a drag on US economic growth. While single-family home building has recently improved, both groundbreaking for overall residential construction projects, including apartments, and new permit issuance have remained subdued.
With mortgage rates remaining high, nearly a third of builders had to cut prices to lure buyers in November, and 60 per cent of firms were offering sales incentives, NAHB said. The average price cut was 5 per cent, down from 6 per cent in October.
