Builder Confidence Dips Slightly, Still Near All-Time Highs

Builder confidence in the market for newly built single-family homes slipped again in April, edging down 1 point to 69.   The National Association of Home Builders (NAHB) said its NAHB/Wells Fargo Housing Market Index (HMI) edged down one point to 69.  The HMI has slipped 1 point in each of the last three months. The builders' group said however that the Index remains "on firm ground."

Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI gauges its new home builders' perceptions of both the current market for newly built single-family homes and expectations for those sales over the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than as poor.

The HMI index gauging buyer traffic, historically the least optimistic of the components, held steady at 51.  Builder perceptions of current sales conditions dropped 2 points to 75 and expectations for sales over the next six months fell a single point to 77.

NAHB Chairman Randy Noel commented, "Strong demand for housing is keeping builders optimistic about future market condition.  However, builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs. Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability."

"Ongoing employment gains, rising wages and favorable demographics should spur demand for single-family homes in the months ahead," NAHB chief economist Robert 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," he said.

Regional scores for the HMI are reported as three-month moving averages.  The South was 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.