Homebuilder Confidence Slips Over Tariff Concerns

Builder confidence for newly built single-family homes fell two points in June to 68, over rising tariff of construction materials according to the latest data from the NAHB/Wells Fargo Housing Market Index (HMI) released by the National Association of Home Builders (NAHB) on Monday.

According to the NAHB, rising costs of imported lumber from Canada, as well as increasing raw material tariffs for construction, were some of the key factors that impacted builder confidence in June.

The HMI is derived from a monthly NAHB survey that gauges builder perceptions of current single-family home sales and sales expectations over the next six months. The survey also asks builders to rate prospective buyers. The scores for each of these components is then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good rather than poor.

Despite the rising tariffs and lumber prices which have “added nearly $9,000 to the price of a new single-family home since January 2017,” according to NAHB chairman Randy Noel, builders remain confident about the housing market and buyer prospects according to the survey. “Builders are optimistic about housing market conditions as consumer demand continues to grow,” Noel said.

All three HMI indexes—builder perceptions of home sales, sales expectations over the next six months, and prospective buyer traffic—were down in June, the survey revealed. While the index measuring current sales conditions fell to 75, the one gauging expectations in the next six months dropped to 76. The index measuring buyer traffic was down to 50 in June.

However, NAHB said that additional single-family construction will continue at a quick clip despite these headwinds and reduced confidence.

“Improved economic growth, continued job creation, and solid housing demand should spur additional single-family construction in the months ahead,” said NAHB Chief Economist Robert Dietz. “However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”

Regionally, the Southern region followed overall builder confidence and fell one point to 71, while the West and Midwest remained unchanged at 76 and 65 respectively. The Northeast was the only region to show an increase on the three month moving averages for regional HMI scores, rising two points to 57.