Builder Confidence at a 12-Year High

Filed in Economics by on March 15, 2017 1 Comment
house

NAHB 20 Club Member Ence Homes built this home in St. George, Utah.

Builder confidence in the market for newly-built single-family homes jumped six points to 71 on the NAHB/Wells Fargo Housing Market Index (HMI). This is the highest reading since June 2005.

“Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that affects permitting,” said NAHB Chairman Granger MacDonald.

MacDonald’s comments on the HMI were picked up later in the day by White House Press Secretary Sean Spicer. During a March 15 press briefing aboard Air Force One, which was en route to a Trump rally in Nashville, Tenn., Spicer said:

“The President’s regulatory reform is being applauded across many industries, not just the auto industry that we saw here in Detroit.  This morning the National Association of Home Builders released its monthly index for March, which is set at its all-time level in 12 years.  The NAHB directly cited President Trump’s ‘actions on regulatory reform,’ specifically mentioning his recent executive orders on the Waters of the United States rule as a cause of the surge.”

Providing further analysis, NAHB Chief Economist Robert Dietz added, “While builders are clearly confident, we expect some moderation in the index moving forward. Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for 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 poor.

All three HMI components posted robust gains in March. The component gauging current sales conditions increased seven points to 78 while the index charting sales expectations in the next six months rose five points to 78.  Meanwhile, the component measuring buyer traffic jumped eight points to 54.

Looking at the three-month moving averages for regional HMI scores, the Midwest increased three points to 68 and the South rose one point to 68. The West dipped three points to 76 and the Northeast edged one point lower to 48.

Read Dietz’s analysis in this Eye on Housing blog post, get details and tables at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.

This post was updated on March 16 to include Spicer’s comments.

 

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