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National Home Builder Confidence Index Climbs to 70 in May

17 May 2018

"This leaves eager first-time buyers behind, competing for limited supply of homes". Sales of new US homes jumped 4 percent in March.

A new analysis released Tuesday, the National Association of Home Builders/Wells Fargo builder sentiment index, shows homebuilder satisfaction rose to 70 points, up from a revised reading of 68 in April. The scores for each component are then used to calculate the seasonally adjusted index where any number over 50 indicates that more builders view conditions as good.

NAHB Chair Randy Noel said that while demand is boosting builders' optimism, record-high lumber prices are making it hard for builders to construct new homes for entry-level buyers. "With these fundamentals in place, the housing market should improve at a steady, gradual pace in the months ahead". The subindex measuring sales expectations for the next six months also remained unchanged at 77. Listings for existing homes sank to the lowest levels on record for March.

Completions, meanwhile, rebounded, up 2.8 percent to 1.26 million-but completions for single-family units totaled 820,000, slipping 4 percent.

Capacity utilization for the industrial sector climbed 0.4 of a percentage point in April to 78%, a rate that is 1.8 percentage points below its 1972-2017 average.

The Housing Market Index strengthened by two points to 70 (the estimate was 69). Some Fed watchers have been cautioning that any lasting uptick in inflation or in economic growth might spur the Fed to pursue an additional rate increase before year's end. Such factors are mitigating other forces that may restrain optimism among developers: Rising lumber prices are making building more costly and mortgage borrowers are confronting escalating interest rates.

In addition to higher materials costs, builders have been struggling to find the skilled workers they need to start new projects.

Additionally, approvals for builds fell, 1.8 percent from March to 1.35 million permits; however, approvals for single-family starts were up, 0.9 percent to 859,000 permits.

Housing economists have more closely watched trends in single-family building, which has seen below-average building for several years.

National Home Builder Confidence Index Climbs to 70 in May