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Homebuilder confidence is holding steady and is expected to increase next year due to optimism centered on the expectation that the incoming presidential administration will be better for business in 2025.
Builder sentiment for new single-family homes was at 46 in December, the same as in November, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday. After dipping to a 2024 low of 39 in August, the reading had increased for three consecutive months until leveling off in December.
The survey showed that sales expectations in the next six months increased three points to 66, the highest point since April 2022. Readings were unchanged from last month on builders cutting home prices (31%), the average price reduction (5%) and builders using incentives (60%).
“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” NAHB Chairman Carl Harris said in a statement. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
President-elect Donald Trump has touted plans to boost housing affordability by battling inflation to reduce mortgage rates, encouraging new construction and ending unnecessary regulations.
Still, builders face labor shortages and rising costs of materials that could keep home prices elevated in the new year.
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The Federal Reserve is expected to cut interest rates again this week, but lingering concerns about inflation will mean mortgage rates stay above 6%, noted NAHB chief economist Robert Dietz.
The builder trade group also announced this week that U.S. single-family building permits issued during the first 10 months of 2024 totaled 846,446, up 9.4% from the same period of 2023. All four regions of the country posted annual increases, led by the West at 13.6%.
Nearly all states had annual increases in permits, except for New Mexico, New Hampshire, Alaska and Hawaii. The number issued in Washington, D.C., also dropped, according to the report.
Texas issued the most permits of any state at 136,374, a 9.7% increase from the same period of 2023. Among U.S. metropolitan areas, Houston had the most permits, 45,310, while Dallas was second at 40,563.