Builder confidence in the market for new single-family construction fell three points in April to a reading of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index, after reaching the highest level recorded since June 2005 in March.
NAHB Chairman Granger MacDonald said in a statement that, even with the decline, builders are reporting strong interest from potential homebuyers. The overall index and sub-indices held above the breakeven mark of 50.
- All three HMI measures dropped off in April, with current sales conditions decreasing three points to 74, sales expectations for the next six months declining three points to 75 and buyer traffic dipping one point to 52.
April's HMI reading could be the start of a leveling off in builder confidence following the post-election surge, NAHB Chief Economist Robert Dietz predicted in March. With increasing construction material costs, rising mortgage rates and the ongoing lot and labor shortage, strong supply- and demand-side headwinds could keep the housing market's recovery from kicking into higher gear.
Many builders had pegged their optimism on the Trump administration's pledges around deregulation and financial reform. So far, President Donald Trump has called for the review and revision of the Dodd-Frank Wall Street Reform and Consumer Protection Act and, in February, issued a similar executive order calling on the Environmental Protection Agency and the Army Corps of Engineers to revise or repeal the Waters of the U.S. rule. Examining and, possibly, overturning, these and other Obama-era regulations will be a multi-year process, however.
More immediately, last month Trump signed legislation repealing the Department of Labor's Fair Pay and Safe Workplaces Act. And earlier this month, he signed a bill overturning a provision of the Occupational Safety and Health Administration's recordkeeping rule that had extended its enforcement of violations. Construction industry associations had pushed back on the so-called "blacklisting" rule, in particular, citing high implementation costs and a violation of First Amendment rights by requiring companies to disclose compliance details.
Still, demand for new single-family construction persists. With February's residential housing starts bouncing back 6.5% from January to a rate of 872,000 starts, the market could see steady growth in its future. Tomorrow's monthly housing starts release from the Commerce Department will offer more insight on that trajectory.
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