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Builder Confidence on Firm Foundations

The latest installment of the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows builder confidence in the market for newly-built single-family homes mostly staying strong. However, there are concerns on the horizon that could continue to impact the balance between supply and demand when it comes to housing.

The HMI for March shows builder confidence at 70, one point down from February’s revised score.

“Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market,” said NAHB Chairman Randy Noel. “However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”

Based on a monthly survey NAHB conducts, 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.” Any number over 50 indicates that more surveyed builders viewed conditions as good than poor.

The HMI component gauging current sales conditions held steady at 77. The measure of confidence in sales over the next six months decreased by two points, settling in at 78. Finally, the score for buyer traffic fell three points to 51.

The West boasted the highest three-month moving average at 79, down two points. The South was next in line, dropping a single point to hit 73. The Midwest score decreased four points to settle at 68. The Northeast was up a single point, but its score still only totaled 57.

NAHB Chief Economist Robert Dietz said, “A strong labor market, rising incomes, and a growing economy are boosting demand for homeownership even as interest rates rise. With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”

About Author: David Wharton

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