Homebuilder confidence slipped slightly in April, but experts point out that builders continue to show optimism, according to the National Association of Home Builders and Wells Fargo Housing Market Index.
This dip comes just after President Donald Trump’s regulatory reform plans sent builder confidence soaring to a 12-year high in March.
The index fell three points in April to 68, down from March’s 71.
“Even with this month’s modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential homebuyers,” NAHB Chairman Granger MacDonald said.
Derived from a monthly survey that NAHB has been conducting for 30 years, the 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. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.
All three HMI components saw losses in April, but remained well above the 50 threshhold. The component that measures current sales conditions fell three points to 74 during the month, while the index which charts sales expectations over the next six months dropped to 75. The component measuring buyer traffic decreased one point to 52.
“The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” NAHB Chief Economist Robert Dietz said. “However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices.”
The industry also continues to struggle with construction labor shortages, pulling down the number of homes built and causing housing supply to dwindle. However, a new trend supplementing traditional homebuilders with robots and factories is gaining ground. Read more about that here.