The National Association of Home Builders’ index on home builder confidence was recently updated for December 2017, and they have reportedly reached their highest point since 1999. The home builder confidence index measures the confidence of builders in the market, their plans to build in the short term (both multifamily properties and single-family homes), and is in general a reflection of the market. This is good news for anyone who owns property, has plans to build or invest, or is looking to sell their property soon.
Positive Outlook Rising
The homebuilder confidence index considers 50% the line between a positive or a negative outlook of the residential landscape. The index now stands at 74%, representing a gain of 5% from December 2016. This is thought to be linked to the expectations of builders, realtors, and homeowners and buyers that the market will continue to improve. The index had dropped sharply during 2008 but has been rising steadily since then. Currently the expectation for the new year is fewer regulatory barriers, continued access to capital, and a shift in opinion that the new tax laws will benefit the housing space. The 74% represents the confidence of home builders, but that confidence is not limited to just the builders.
Currently, realtors and investors are also increasingly positive about the future of the market and are not expecting market or regulatory volatility. Homeowners and those looking to buy homes have also been increasingly optimistic about the market conditions. These positive signs have also led to pricing that is signaling the need to create more single family homes for the market. It is expected that the creation of single family homes will continue to increase. This is necessary to match the rising level of demand that will come from the timing of these increases in expectations.
Possible Market Fluctuations
When the market’s demand starts to exceed the supply, the price points at which you can enter the market will continue to rise. When these moments of rapid rise in demand occur, the market will compensate with increased property values. However, one financial factor that, on the overall, stays relatively constant compared to property values, is the price of labor and materials for construction. There are obviously natural market fluctuations for certain materials, such as limestone, but overall you can still expect the same general figure.
This means that anyone looking to build investment properties, or just looking to build a private home, is at an advantage when the market has confidence and demand. The scales of buying vs. building get tipped. The most recent index report also showed that buyer traffic is up over 6%, that the current market conditions have continued to improve, and that they are expected to continue to improve over the next year. The lowered unemployment rates indicate that though conditions improve, the amount of product on the market is not rising as fast as demand.
If you would like more information about building a home or an investment property, please contact T.F. Harper & Associates LP, located in Austin, TX.