February Builder Confidence at ‘Sustainable’ Level

Builder confidence in the market for newly built single-family homes fell in February, a level the National Association of Home Builders said represented a “normal” range.

The NAHB/Wells Fargo Housing Market Index declined by two points in February to 65. All three HMI components fell: the component gauging current sales conditions slid one point to 71; the index charting sales expectations in the next six months saw a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.

Regional three-month moving averages saw the Northeast fall two points to 50, while the Midwest rose one point to 65. The South dipped one point to 67 and the West held steady at 79 for the third month in a row.

The index considers any number over 50 a market in which builders view conditions as “good” than “poor.”

“While builders remain optimistic, we are seeing the numbers settling back into a normal range,” said NAHB Chairman Granger MacDonald, “Regulatory burdens remain a major challenge to our industry.”

“With much of the decline this month resulting from a decrease in buyer traffic, builders continue to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages,” said NAHB Chief Economist Robert Dietz. “Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said measures of buyer traffic were particularly soft as builders struggle to contain costs.

“Home builders continue to report difficulty reducing costs as supply side restrains, including labor shortages, are continuing to fuel price gains,” Vitner said. “Despite the challenges that remain, we expect steady gains in single-family home building in 2017.”