Homebuilder Confidence Dips Slightly in August

Paul Ausick

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for August slipped one point from July’s index reading of 68 to 67. The HMI posted an 18-year high of 74 in December 2017. Economists polled by Bloomberg were expecting an index reading of 69.

Builders continue reporting strong demand for new homes but remain concerned about affordability resulting from rising costs for materials, labor shortages and a decline in buildable lots.

The index is based on an NAHB monthly survey of homebuilder perceptions of current single-family home sales and expectations for sale in the next six months. An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions subindex for dropped by a point to 74 and the su-index that estimates prospective buyer traffic fell two points to 49. The subindex measuring sales expectations for the next six months dropped from 73 to 72.

The NAHB noted:

The solid economic expansion and firm job market should spur demand for new single-family homes in the months ahead. Meanwhile, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges, as indicated by the latest quarterly reading of the NAHB/Wells Fargo Housing Opportunity Index.

In the NAHB’s regions, three-month moving average indexes dipped in two of four regions. The Northeast and Midwest index scores fell three points to 54 and 62, respectively. The South held steady at 70, and the West was unchanged at 75.