HOME BUILDER TARIFFS BITE AND CONFIDENCE FALTERS

For the month of September in comparison to the same time last year, home builder sediment is still at optimistic levels. The overall home builder confidence level for September is 67, which is unchanged from August and 3 points higher than September of 2017. According to the National Association of Home Builders, lumber prices are down which is helping to keep the confidence boosted for single family dwellings. However, the tariffs are a threat to the high confidence, which does falter slightly compared to earlier this year.

A Look At Some Numbers

The NAHB considers readings over 50 as an indication that more builders see conditions as being good rather than poor. As mention previously, the overall builder confidence is at a 67 for September, while it was at 64 in September of 2017. However, in January of 2018, that confidence was at its highest for the year at a 72. The economic recovery for the housing market has been one of the slowest recoveries this economy with 2016 being the first time builder confidence consistently pulled out of the 50s towards the end of the year. Still, the overall confidence hasn’t stayed in the 70s, which could signal the high boost could be short lived.

The components give a more detailed picture of what builders are seeing. The present single-family home builds and the projected 6 month single family home builds are still strong at 73 and 74 respectively, though weaker than how the year started at 79 and 78. However, it’s the traffic of prospective buyers that stays right around the 50 mark. The measurement of prospective buyers was at its highest in recent years in December of 2017 with a 58. For September of this year, it’s at a 49.

Lower Cost For Some Materials; Higher For Others

Other than lumber, rising material costs related to the tariffs seems to be an issue. According to NAHB Chief Economist Rob Dietz, consumers ability to afford houses is a problem. Interest rates are expected to keep going up in the face of increasing material costs made worse by the trade war (NAHB, 2018). Caution seems to be the proper attitude at this point.

Keeping An Eye Out

According to Ridrigo Sermeno for Kiplinger, “Total housing starts rose 9.2% in August to a seasonally adjusted annual rate of 1.282 million” (Sermeno, 2018). Total housing is still on the rise, which is helping to feed the current builder confidence. It still remains to be seen the total effect of the tariffs will have on housing. The anxiety about rising material costs should certainly not be shoved aside and the building situation should be watched closely. The stock market has responded with a slow rise in the housing sector to match the slow rise in new housing. For the home builder marketing, it appears there is still a housing recovery, albeit a slow one.

NOTE: All NAHB numbers pulled from the National Association of Home Builders Housing Market Index Report produced monthly.