Home Builder Confidence High Despite Rising Costs

The June National Association of Home Builders/Wells Fargo Housing Market Index came in at a very strong reading of 66. The index stood at 66 last year in June 2017. A reading above 50 is considered positive sentiment.

All three the index's components were very solid. Current sales conditions hit 75, the component gauging sales expectations in the next six months was 76 and buyer traffic fell came in at 50.

Housing starts have been climbing slowly but not as much as the market needs. There is a severe shortage of existing homes for sale, and that is pushing home prices higher at a very fast pace, weakening affordability, especially at the entry level. Homebuilders, faced with higher costs for land, labor and materials, are focused mostly on move-up and luxury home construction, as margins are squeezed at the entry level.

"Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead," said NAHB chief economist Robert Dietz. "However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed."

Source: NAHB.org

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