Confidence among home builders leapt on the expectation of less red tape.
Home builder confidence soared in December to a level last seen at the heights of the housing bubble as construction firms anticipated less red tape under the presidency of Donald Trump.
The National Association of Home Builders said its closely-watched sentiment index surged to a reading of 70, the highest since July 2005. Economists had forecast an unchanged reading of 63.
The surge in builder confidence is due to a “post-election bounce,” the group said in a statement.
“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.”
All three of the index’s sub-gauges gained in December. The measure of current conditions jumped seven points to 76, while the component that measures expectations for the upcoming six months soared nine points to 78. Both were the highest since 2005.
Meanwhile, the gauge that tracks the traffic of prospective buyers rose six points to a reading of 53.
Any reading over 50 in a diffusion index like NAHB’s is a sign of improvement. December’s reading was the first time the traffic index cracked the neutral 50 line since the bubble’s peak more than a decade ago, a development that NAHB Chief Economist Robert Dietz called significant.
Survey respondents commented that customers who turned out after the election believed the economy will improve, Dietz told MarketWatch. They came to sites more motivated to make a purchase and aware that interest rates would likely rise.
The 30-year fixed-rate mortgage averaged 4.16% in the week ending Dec. 15, Freddie Mac separately reported Thursday, continuing gains since the election.
Trump addressed NAHB in August with a pledge to cut red tape. The group says regulatory costs have risen 29% in the past five years.
Though builder confidence has recovered from the hit it took during the crisis and recession, home building activity hasn’t.
Sentiment has averaged a reading of 61 in 2016. The last time that happened, in 2002, builders were breaking ground on an average 1.7 million homes, nearly 50% more than the average they’ve run at so far in 2016.
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