"This notable rise in builder sentiment is largely attributable to a postelection bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability," said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Illinois.
"This is particularly important, given that a recent NAHB study shows that regulatory costs for homebuilding have increased 29 percent in the past five years," added Brady, whose name has come up as a possible head of the Federal Housing Administration in the Trump administration.
Of the index's three components, current sales conditions increased 7 points to 76, sales expectations in the next six months rose 9 points to 78 and buyer traffic rose 6 points to 53. This is the first time buyer traffic has been in the positive since October 2005.
"Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing," said NAHB Chief Economist Robert Dietz. "The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor."
Mortgage rates have been on the upswing since the election, with the average rate on the 30-year fixed moving higher again Wednesday, after the Federal Reserve announced its expected quarter-point hike in the Federal Funds rate and that it would likely raise rates three times next year.
Despite rising rates, stocks of the big public builders rose along with the rest of the market. They did drop pretty sharply after Trump's Treasury secretary-designate, Steve Mnuchin, suggested capping the mortgage interest deduction, a tax benefit that is highly popular with homebuyers. The stocks then recovered after that.