Real Estate

Home builder confidence soared to highest level in 12 years as Trump rolls back regulations

Home builder sentiment rises to highest level in 12 years

The nation's home builders couldn't be happier with President Trump's first move to roll back strict environmental rules.

A 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 in March of 2016. Anything above 50 is considered positive sentiment.

"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," said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

Builder sentiment had moved higher just after the election, but then receded at the start of the year amid rising mortgage rates and a continued labor shortage. Trump signed an executive order at the end of February 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" and claim that 25 percent of the cost of a home today is due to regulation, including this one.

Builders are not only pleased with Trump's first move on water, they also expect further deregulation to bring down construction costs. There are, however, other roadblocks keeping the nation's builders from producing more homes, which are sorely needed in today's tight housing market.

"While builders are clearly confident, we expect some moderation in the index moving forward," said NAHB Chief Economist Robert Dietz. "Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor."

Of the index's three components, current sales conditions jumped seven points to 78, and sales expectations over the next six months rose five points — also to 78. Buyer traffic, which had been mired in negative territory, finally broke out, rising eight points to 54.

On three-month moving averages regionally, the sentiment index for the Midwest increased three points to 68 and for the South rose one point to 68. In the West it fell three points to 76 and in the Northeast fell one point to 48.