Monday, 25 of March of 2019

Economics. Explained.  

Homebuilder Confidence

March 18, 2019

Homebuilder confidence was unchanged in March at 62 after having risen 4 points in February.  Most economists had expected a slightly higher number so a level of 62 was slightly disappointing.  However, a level of 62 is indicative of a solid level of confidence going forward although, admittedly, it is below readings of 70-75  at this time last  year.

NAHB Chairman Greg Ugalde said that, “Builders report the market is stabilizing following the slowdown at the end of 2018 and they anticipate a solid spring home buying season.”

NAHB Chief Economist Robert Dietz said  “In a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week.  Increased inventory of affordably priced homes – in markets where government policies support such construction – will enable more entry-level buyers to enter the market.”

The NAHB report also indicated that affordability still remains a key concern for builders. The skilled worker shortage, lack of buildable lots and stiff zoning restrictions in many major metro markets are among the challenges builders face as they strive to construct homes that can sell at affordable price points.

Traffic through the model homes fell 4 points in March after having risen 4 points in February.  However, the combination of falling home prices and lower mortgage rates should boost traffic in the months ahead.

Reflecting optimism about the future the homebuilders expectations index jumped 3 points in March to a solid 71.

Not surprisingly there is a fairly close correlation between builder confidence and housing starts.  Given the rebound in the expectations component it is likely that housing starts will pick up further in the months ahead.  But builders continue to have difficulty finding labor so the upswing in starts will probably be muted.

However, builders have many units that have been authorized but not yet started.  In fact, the authorized but not yet started units are the highest they have been in a decade.  Our sense is that as labor slowly becomes available builders will continue building new homes.  Thus, we look for starts to climb about 4% this year.

Stephen Slifer

NumberNomics

Charleston, SC


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