US homebuilder outlook jumps on optimism Trump will cut red tape

Home builders’ outlook for the next six months rose to the highest in more than 2 1/2 years on optimism that the upcoming Trump administration will help remove construction regulatory hurdles and boost sales.

A gauge of sales in the next six months increased to 66 this month, the highest since April 2022, based on indexes from the National Association of Home Builders and Wells Fargo. The overall confidence index and a measure of present sales were both unchanged compared with November, and traffic from prospective buyers dipped slightly.

“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”

US home builders have benefited this year from a shortage of previously owned homes for sale that has steered buyers to new homes. Construction firms have also lured customers by buying down people’s mortgage rates and using other incentives, while also building smaller homes to make them more affordable.

But industry analysts anticipate the outlook will be challenging. With the Federal Reserve now expected to make fewer interest-rate cuts next year, mortgage rates will likely stay higher for longer.

Last week, a Barclays analyst downgraded the stocks of home builders D.R. Horton, Lennar, PulteGroup and KB Home, saying that the construction market likely has “hit a ceiling.” The iShares US Home Construction exchange-traded fund, comprised of builders and related companies, has fallen 14% from an all-time high reached mid-October.

In December, the shares of builders reporting cutting prices and using sales incentives were unchanged.

Around the US, sentiment improved most in the South, increasing to the highest level since April. Sentiment rose in the Northeast, was unchanged in the Midwest and fell slightly in the West.

The federal government will provide further insight on the construction market Wednesday when it releases November housing starts.

— By Michael Sasso (Bloomberg)