U.S. builder confidence unexpectedly improves in February

The National Association of Homebuilders (NAHB) announced on Wednesday its housing market index (HMI) rose 1 point to 84 in February from 83 in January.

Economists had forecast the HMI to stay at 83.

A reading over 50 indicates more builders view conditions as good than poor.

The three HMI components were mixed this month. The indicator gauging current sales conditions held steady at 90 in February, while the measure charting sales expectations dropped 3 points to 80 and the component measuring traffic of prospective buyers rose 4 points to 72.

NAHB Chairman Chuck Fowke noted: “Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows. Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year.”

Meanwhile, NAHB Chief Economist Robert Dietz said: “Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower-cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks. Some builders are at capacity and may not be able to expand production due to these headwinds.”