Builders Grow More Optimistic as Spring Takes Hold

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In the West and Northeast, indexes were unchanged at 76 and 55, respectively.

"Manufacturing in this report may finally be coming alive, joining the host of small sample surveys which have always been reporting strength and moving perhaps in line with acceleration underway in the factory orders report", Econoday said. New construction of multi-family units tumbled more than 12%.

Analysts at Wells Fargo Securities seemed little concerned about the overall decline.

Single-family starts, at 894,000 units annualized, were essentially flat compared with the March level.

Sentiment among homebuilders rose for the first time in five months as job gains and tax cuts helped keep buyer demand healthy amid rising prices and mortgage rates, according to data Tuesday from the National Association of Home Builders/Wells Fargo.

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.

Builders Grow More Optimistic as Spring Takes Hold
Builders Grow More Optimistic as Spring Takes Hold

Wells Fargo Housing Market Index was up 2 percentage points to 70, the fourth time this year that it has been at that level or above. 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.

Higher demand for single-family properties is what has bolstered builder confidence - and that's likely to continue as the year goes on, according to Robert Dietz, chief economist at NAHB.

The National Association of Home Builders (NAHB) derives this index from a monthly survey that gauges builder perception of current single-family home sales and sales expectations for the next six months.

The components of the index reveal that builders' sentiment is up for current conditions, although there was no change in measures of buyer traffic or sales expectations in the next 6 months.

Homebuyers have been snapping up newly built houses as the economic outlook has continued to improve in recent months. This was evidenced by the fact the nation's gross domestic product expanded at an annual rate of 2.3% in January through March, down from the 2.9% pace in the final quarter of 2017.