Builders had been incredibly optimistic just after the 2016 presidential election, expecting that the new administration would ease regulations, which have been adding to builder costs. Instead, they continue to struggle with a growing labor shortage, as the administration's immigration stance has dissuaded immigrant workers from coming to the U.S.
Of the index's three components, current sales conditions rose two points to 77. Buyer traffic also increased two points to 50, which is the first time in six months that this component has been in positive territory. Sales expectations over the next six months fell one point to 77.
Home builders are clearly benefiting from a severe shortage of existing homes for sale. While new construction is more expensive, move-up buyers today are left with little choice.
Builders are also benefiting from a new type of first-time buyer. Millennials have waited longer to become homeowners, meaning more first-time buyers are older and have had more time to save for a down payment. Some are skipping starter homes and going straight to a more expensive, new product.
Regionally, on a three-month moving average, builder confidence in the Northeast jumped five points to 54 and rose one point to 69 in the South. Both the West and Midwest remained unchanged at 77 and 63, respectively.