Homebuilder outlook eases while hovering near 18-year high

Confidence among U.S. homebuilders slipped to a four-month low in March while remaining above historical averages, indicating developers expect demand to withstand rising mortgage rates.

The Housing Market Index slipped to 70 from a revised reading for February of 71, according to data from the National Association of Home Builders and Wells Fargo.

The current-sales gauge for single-family homes remained unchanged from February at 77. But the homebuilders' outlook for sales in the next months dipped to 78 from 80.

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A contractor works on the frame of a home under construction at the D.R. Horton Express Homes Magma Ranch housing development in Florence, Arizona, U.S., on Thursday, Nov. 16, 2017. Photographer: Caitlin O'Hara/Bloomberg

Even with the decline, homebuilder confidence remains buoyant after hitting an 18-year high in December. Developers still expect strong demand for new homes as low unemployment and steady economic growth support Americans' buying power.

Optimism rose in three out of the country's four geographic regions. At the same time, rising interest rates pose a headwind, as steeper mortgage payments could deter some prospective buyers.

"Builders' optimism continues to be fueled by growing consumer demand for housing and confidence in the market," NAHB Chairman Randy Noel, a custom-home builder from Louisiana, said in a statement. "However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand."

The gauge measuring buyer traffic decreased to 51 from 54 on a month-to-month basis.

By region, the index for the Midwest fell five points to 65, while indexes for the Northeast, South and West all increased.

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