Home builder confidence jumps 4 points in November

U.S. home builders are seeing more buyer traffic through their model homes, and that was enough to boost their overall confidence in November far higher than expected.

Builder sentiment in the single-family housing market jumped 4 points to a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Anything higher than 50 is considered positive.

"Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery," said National Association of Home Builders Chief Economist David Crowe. "After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015."

Workers apply stucco to an under construction at the Toll Brothers Inc. Jupiter Country Club housing development in Jupiter, Florida.
Mark Elias | Bloomberg | Getty Images
Workers apply stucco to an under construction at the Toll Brothers Inc. Jupiter Country Club housing development in Jupiter, Florida.

Builder confidence was mired in negative territory for the first half of 2014, amid higher home prices, weaker consumer confidence and tight inventory. Several of the nation's large public home builders admitted they were too aggressive in raising prices last year, and this fall they began to remedy that. The median price of a newly built home sold in September was 4 percent lower than it was in September of 2013.

All three components of the HMI saw gains in November: Current sales conditions rose 5 points to 62, future sales expectations rose 2 points to 66 and buyer traffic increased 4 points to 45the only component still negative.

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"Growing confidence among consumers is what's fueling this optimism among builders," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware. "Members in many areas of the country continue to see increasing buyer traffic and signed contracts."

Mortgage interest rates saw a steep drop briefly at the end of October, which may have increased buyer traffic in new model homes. There is also still a tight supply of existing homes for sale. In September, sales of newly built homes were 17 percent higher than they were a year ago. Housing starts are still running very low.

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Regionally, on a three-month running average, all but the Midwest saw gains in home builder confidence. Builders in the South are most optimistic, but confidence in the Northeast is still in negative territory.