Signaling their approval of President Donald Trump’s steps to relax environmental rules, home builder confidence has soared to a 12-year high. According to a report by CNBC, the monthly index of builder sentiment jumped six points to the highest level in 12 years. The National Association of Home Builders/Wells Fargo Housing Market index hit 71 in March, a sizable jump from 58 during the same period a year ago. NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas, cited moves by the Trump administration as drivers to this increase.
“Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting.”
While home builder sentiment had edged higher following the November general election, it receded at the start of 2017. That increase was fueled by rising mortgage rates and an ongoing labor shortage. In February, Trump signed an executive order designed to roll back a 2015 rule from the Obama administration known as the Waters of the United States. Home builders have called the rule “burdensome.” They contend that as much as 25 percent of the cost of a new home is the result of the regulations. They are buoyed by this move and are hopeful that additional deregulation will bring down construction costs. NAHB Chief Economist Robert Dietz noted that there are other hurdles that are preventing builders from producing more new housing stock, which is needed in today’s market.
“While builders are clearly confident, we expect some moderation in the index moving forward. Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor.”
In past cycles, stronger builder sentiment has signaled a stronger pace of construction, but builder activity has been tepid in the years since the housing crisis and recession. This February builder index was based on 313 respondents. A measure of current sales conditions for single-family homes jumped seven points to 78, while a gauge of traffic by prospective buyers gained eight points to 54. Builders’ view of sales over the next six months climbed five points to 78.
Across the regions, the three-month moving averages increased in the Midwest, up 3 points to 68 and in the South, gaining 1 point to 68. The Northeast edged down one point to 48 and the West was fell 3 points to 76.