Homebuilder sentiment exceeds forecast as outlook brightens

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Confidence among homebuilders stabilized in September as demand held up and lumber prices fell, a National Association of Home Builders/Wells Fargo report showed Tuesday.

The Housing Market Index remained unchanged from the prior month at 67 (the estimate was 66). The gauge of the six-month sales outlook rose for first time since February, climbing to 74 from 72, while the current sales index for single-family homes increased to 74 from 73. The measure of prospective buyer traffic remained unchanged at 49.

While the unchanged main gauge matched the lowest since September 2017, it bucked analyst estimates for a decline and two of the components advanced. That signals the housing market, at least for newly constructed homes, may be stabilizing after signs of a slowdown in recent months.

While rising prices and mortgage rates have squeezed buyers, a strong labor market and tax cuts have supported demand. Data on housing starts and existing-home sales due in the next two days are both projected to show improvement in August.

Builders continue to report strong demand as millennials and other newcomers enter the market, the report said. Affordability, however, remains a concern as builders work to manage construction costs and keep prices competitive. Lumber prices have tumbled since reaching a record in May.

"A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes," NAHB Chief Economist Robert Dietz said in a statement. "However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish."

The confidence gauge in the Northeast rebounded to 61 from 46, matching its highest since 2005. Indexes of confidence fell in the South and Midwest while the West was unchanged.

Bloomberg News
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