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Home Builders Proceed With Cautious Optimism

construction-twoConfidence among home builders has held firm over the last few months, showing slow, but continued progression in the single-family sector. However, builders are still faced with concerns about labor and lot shortages.

Home builder confidence in the market for newly-built single-family homes was flat for the month of April at 58, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

In March and February, builder confidence came in at 58, down from January’s 61 and seven points lower than its recent peak of 65 in October. That said, the index is still well above the tipping point of 50 and three points above last February’s number.

“Builder confidence has held firm at 58 for three consecutive months, showing that the single-family housing sector continues to recover at a slow but consistent pace,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois. “As we enter the spring home buying season, we should see the market move forward.”

The NAHB/Wells Fargo Housing Market Index 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 builders view conditions as good than poor.

HMI_aprAccording to the NAHB, the HMI components gauging sales expectations and buyer traffic both rose one point to 62 and 44, respectively. Meanwhile, the sales conditions indicator decreased two points to 63.

Regionally, in terms of three-month moving averages for regional HMI, all four regions saw slight declines. The West and Northeast decereased two points to 44 and 67, respectively. The South and Midwest regions posted one-point losses to 57 and 58.

Robert Dietz, Ph.D., Chief Economist and SVP for Economics and Housing Policy for NAHB stated, "Builders remain cautiously optimistic about housing market growth. NAHB is forecasting faster single-family construction growth for 2016 than the 10 percent gain recorded in 2015. However, difficulties associated with access to labor and building lots are restraining growth in many local markets. Nonetheless, healthy levels of job creation, low mortgage interest rates and lack of existing home inventory will support increased construction of single-family homes. The residential construction sector will be a bright spot for an economy that slowed during the first quarter of 2016."

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