According to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence for new single-family homes across the U.S. rose seven points from last month. This month’s reading of 70 points was the highest seen since July 2005, when confidence also reached 70 on the index.
The spike, however, might be an outlier. NAHB Chairman Ed Brady said December’s increase can largely be attributed to “a post-election bounce.”
“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,” Brady said in a statement. “This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29 percent in the past five years.”
Trump gave a speech to the NAHB in August and outlined plans to loosen mortgage lending standards. Some critics have warned that while this may pave the way for more people to become homeowners, it could also drive up prices as demands from homes increases.
“As we learned just a few years’ ago, loosening lending standards can lead to dangerous housing and credit bubbles, which cause real damage when they eventually pop,” Matthew Pointon, property economist at Capital Economics, told Business Insider in November.
Unsurprisingly, 2009 was a low point in the NAHB survey’s history, when the highest builder confidence recorded for the year was 19 points. The lowest, according to historical NAHB data, was 8 points in September 2009.
The index is based on a monthly survey that measures builders’ opinions on the strength of current and future single-family home sales, which they label as “good,” “fair” or “poor.” They are also asked to rate the volume of prospective buyers as “high to very high,” “average” or “low to very low.” — Kathryn Brenzel