August Builder Confidence Down Slightly

Builder confidence in the market for newly built single-family homes edged down one point in August, the National Association of Home Builders reported yesterday, but home builders remained upbeat looking ahead.

The overall NAHB/Wells Fargo Housing Market Index fell by one point to 67 in August, solidly reflecting builder optimism (50 being the balance point between optimism/pessimism). The HMI index measuring current sales conditions inched one point lower to 73 while the component gauging expectations in the next six months all fell a single point to 72. Meanwhile, the metric charting buyer traffic dropped two points to 49.

Looking at the three-month moving averages for regional HMI scores, the South and West each held steady at 70 and 75, respectively. The Northeast fell three points to 54; the Midwest also posted a three-point decline to 62.

“Builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” said NAHB Chief Economist Robert Dietz. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.”

Dietz said the solid economic expansion and firm job market should spur demand for new single-family homes in the months ahead. Meanwhile, he noted, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. “These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges,” he said.