U.S. Homebuilder Sentiment Surges in November

(Reuters) – U.S. homebuilder sentiment rose to a seven-month high in November, with sales expectations over the next six months at their highest in two-and-a-half years, spurred by a Republican election sweep. This optimistic outlook from builders is reflected in the National Association of Home Builders/Wells Fargo Housing Market Index, which increased to 46 this month from 43 in October, surpassing all economist estimates in a Reuters poll that had a median expectation of 43.

NAHB's indicators of current sales and buyer traffic also rose, while the expectations for future sales surged to the highest level since April 2022. NAHB Chairman Carl Harris remarked that builders are increasingly confident about potential regulatory relief from the newly empowered Republicans, which could facilitate more residential construction.

The recent election resulted in Republican control of the White House, with Donald Trump winning over Democrat Kamala Harris, and both chambers of Congress. While the Republicans aim for significant deregulatory changes, many industry-related regulations are state and local, particularly zoning laws.

However, NAHB Chief Economist Robert Dietz noted that the industry still faces challenges like labor shortages, limited building lots, and high material costs. Trump's immigration policies could further restrict labor supply, as the construction sector employs many immigrant workers.

Additionally, the Federal Reserve may maintain higher interest rates longer than anticipated due to ongoing inflation concerns, contributing to rising mortgage rates since the first rate cut in September.

Residential construction has been a drag on U.S. economic growth. While single-family home building shows improvement, overall residential construction, including apartments, has remained low. The Commerce Department will update this data soon, with little change anticipated.

High mortgage rates forced nearly a third of builders to lower prices in November, with 60% offering sales incentives, and the average price cut was 5%, a decline from October’s 6%.