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Strong Homebuyer Demand Spurs Builder Confidence

The confidence of builders in the housing market remained stable in April, spurred by the increasing demand for housing according to data from the National Association of Home Builders’ [1] (NAHB) NAHB/Wells Fargo Housing Market Index (HMI) on Monday.

The HMI [2], which is derived from a monthly survey conducted by NAHB, declined one point to a level of 69 in April. Despite the slight decrease, the index remains on firm ground, NAHB said.

The minor dip in confidence, according to Robert Dietz, Chief Economist at NAHB was likely due to the effects of the prolonged winter weather, especially in the North. “As we head into the spring home buying season, we can expect the market to continue to make gains at a gradual pace,” Dietz said.

The HMI index gauging buyer traffic remained unchanged at 51 even though the data measuring sales expectations in the next six months fell one point to 77, while the component gauging current sales conditions dropped two points to 75.

The HMI gauges builder perceptions of the 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 to measure their confidence. The scores for each component are then used to calculate the index where a number over 50 indicates that more builders view conditions as good rather than poor.

Despite their optimism about future market conditions, builders remained concerned about supply-side constraints according to Randy Noel, Chairman of NAHB and a custom home-builder from LaPlace, Louisiana. “Builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs,” Noel said. “Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.”

Looking at the next six months, Dietz said, “Ongoing employment gains, rising wages and favorable demographics should spur demand for single-family homes in the months ahead.”

Regionally, the South remained unchanged at 73 while looking at the three-month moving averages for regional HMI scores. The Northeast, Midwest, and West showed declines of one, two and three points respectively, to 55, 66 and 76 points.