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Homebuilder optimism rises in August, but not enough to dispel affordability concerns

Builder sentiment rises one point to 66 in August

Although homebuilder confidence rose one point to 66 in August, market affordability continues to threaten future growth, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

“Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” NAHB Chairman Greg Ugalde said.

In August, the index measuring current sales conditions inched forward from 71 to 73 points, while buyer traffic rose from 48 to 50. However, expectations over the next six months fell from 71 to 70 points. 

The three-month moving averages for regional HMI scores show the Northeast fell from 60 to 57 points, the South moved one point from 68 to 69, the West also increased one point to 73 points and the Midwest crawled forward from 56 to 57 points.

“While 30-year mortgage rates have dropped from 4.1% down to 3.6% during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” NAHB Chief Economist Robert Dietz said. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.

 NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. Builders are also asked to rate prospective buyer traffic from very low to very high. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.

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