Builder Confidence Falls for 4th Straight Month
Builder confidence in the market for newly built single-family homes fell for the fourth consecutive month, albeit only slightly, the National Association of Home Builders reported yesterday.
The NAHB/Wells Fargo Housing Market Index edged down one point to 69 in April. The HMI index gauging buyer traffic held steady at 51; the chart measuring sales expectations in the next six months fell a single point to 77; and the component gauging current sales conditions dropped two points to 75. Any number over 50 indicates that more builders view conditions as good than poor.
Regionally, the South remained unchanged at 73; the Northeast fell one point to 55; the Midwest declined two points to 66; and the West dropped three points to 76.
NAHB Chief Economist Robert Dietz said despite the monthly decreases, home builder sentiment remains on firm ground.
“Ongoing employment gains, rising wages and favorable demographics should spur demand for single-family homes in the months ahead,” Dietz said. “The minor dip in builder confidence this month is likely due to winter weather effects, which may be slowing housing activity in some pockets of the country. As we head into the spring home buying season, we can expect the market to continue to make gains at a gradual pace.”
NAHB Chairman Randy Noel, a custom home builder from LaPlace, La., said strong demand for housing is keeping builders optimistic about future market conditions. “However, builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs,” he said. “Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.”
“The HMI has been out of kilter this year because it spiked in December, following the hurricane disruptions last fall,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Builders continue to voice frustrations about the lack of developed lots and continued run-up in materials costs. Absent a surprise agreement on Canadian lumber, we see little prospect of relief. Higher construction costs are adding to affordability concerns tempering gains in new home sales and single-family starts.”
Last week, the Mortgage Bankers Association reported mortgage applications for new home purchases increased by 14 percent in March from February but decreased by 2.6 percent from a year ago. MBA estimated new single-family home sales at a seasonally adjusted annual rate of 682,000 units in March, an increase of 7.9 percent from 632,000 units in February. On an unadjusted basis, MBA estimated 65,000 new home sales in March, an increase of 18.2 percent from 55,000 in February.
