U.S. Homebuilders' Sentiment Slips as Buyers Hunker Down

  • Builders stay fairly confident, while struggling to cut costs
  • Confidence declined most in Northeast, held steady in West

Confidence among U.S. homebuilders dropped in February as rising interest rates damped the market’s optimism, according to data Wednesday from the National Association of Home Builders/Wells Fargo.

Key Points

  • Builder sentiment gauge slipped to 65 (forecast was 67) from 67 in Jan.; readings above 50 indicate more respondents report good market conditions
  • Current sales measure dropped to 71 from 72
  • Gauge of prospective buyer traffic at 46 after 51
  • Six-month sales outlook index fell to 73 from 76

Big Picture

After adjusting from a post-election jump, homebuilders continue to be pretty confident. With the Trump administration and Republican Congress vowing to cut regulation, developers are hopeful it will become easier to buy or build a home. While this mirrors enthusiasm in other sectors of the economy, a continued rise in mortgage rates would curb optimism.

Economist Takeaways

“With much of the decline this month resulting from a decrease in buyer traffic, builders continue to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages,” NAHB Chief Economist Robert Dietz said in a statement. “Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed.”

The Details

  • Confidence held steady in the West
  • Sentiment fell the most in the Northeast, and also dropped in the Midwest and South
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