NAHB: Builder optimism declines for second-straight month

Dive Brief:

  • Builder confidence in the market for new single-family construction fell two points from January to a reading of 65 in February on the National Association of Home Builders/Wells Fargo Housing Market Index.

  • NAHB Chairman Granger MacDonald said the index was moving back into a sustainable range, attributing the slump to a decline in buyers as a combination of headwinds including the labor shortage, insufficient lot supply and high material and labor costs have contributed to higher home prices.

  • All three HMI measures declined in February for the second-consecutive month, with current sales conditions retreating one point to 71, sales expectations dropping three points to 73 and buyer traffic slipping five points to 46.

Dive Insight:

The NAHB cited similar concerns in January's report, pinning optimism on growth in new single-family construction for the coming year. Still, MacDonald touted the strength of the housing market's fundamentals, forecasting continued growth in the market if the new Congress and presidential administration can address these issues.

It's still too early to be certain how a Trump presidency and Republican-led Congress could shape the market. Alongside bullish proposals by the administration to move forward with major U.S. projects like the U.S.–Mexico border wall and fast-tracking certain infrastructure endeavors, Trump has begun to address housing finance reform and has broadly taken aim at regulations — measures that could stand to deflate overall construction costs and ease pressure on the market. 

Still, analysts say the market's real test of fortitude stems from whether it will see an uptick in new residential construction in the coming months. December's construction spending report revealed a slight increase in the residential category, signaling a strong end to 2016 and what experts hope could continue to push steady growth in 2017. New construction could take the strain off tight inventory, easing prices and opening up homeownership to more households.

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Filed Under: Residential Building Economy
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