Builder confidence falls slightly in April

The Scotsman Guide - Victor Whitman - 17 April 2017

After hitting a 12-year high of 71 in March, overall builder confidence in the market for new homes, as measured by the monthly National Association of Home Builders/Wells Fargo Housing Market Index (HMI), fell three points to 68 in April. An overall score of 50 or more means more builders view current market conditions favorably.

“Even with this month’s modest drop, builder confidence is on very firm ground,” said National Association of Home Builders (NAHB) Chairman Granger MacDonald in a press release, adding “builders are reporting strong interest among potential homebuyers.”

The builder-confidence score is calculated from survey results that gauge builders' perceptions about three components of the housing-construction market: current single-family home sales, expectations for the next six months, and traffic of prospective buyers.

All three of these components decreased in the most recent survey, but current sales conditions and sales expectations over the next six months both remained high, at 74 and 75, respectively. Buyer traffic fell one point, to 52, in the most recent HMI, meaning just a little more than half of builders surveyed are confident about the traffic they are seeing from prospective buyers.

The current sales-conditions component has been over 70 for five consecutive months, according to the NAHB press release, which is seen as a sign of "continued demand for new construction," according to NAHB Chief Economist Robert Dietz. Dietz cautions, however, that “builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building-material prices.”

Three-month moving averages at a regional level show builder confidence is highest in the West, where it rose one point to 77 in the April HMI, and remains strong in the Midwest and South regions, which both posted scores of 68. Confidence in the Northeast region is flagging, however, as it dropped 2 points in April, to 46.