FX.co ★ U.S. Homebuilder Confidence Unexpectedly Improves In March

The National Association of Home Builders (NAHB) released a report which indicates an unexpected improvement in the confidence of US home builders for March. The NAHB/Wells Fargo Housing Market Index rose to 51 in March, up from 48 in February, surpassing economists' predictions of remaining unchanged.

For the first time since July, when it peaked at 56, the housing market index has hurdled the neutral point of 50 indicating an optimistic outlook. NAHB Chairman, Carl Harris, expects that if mortgage rates continue to fall, the buyer demand, which already remains brisk, will see more consumers coming in off the sidelines and into the marketplace.

Despite the robust latent demand, Carl Harris adds that builders are still grappling with some supply-side challenges such as a shortage of buildable lots and skilled labor. Additionally, new restrictive codes are increasing the cost of building homes.

The headline index’s surprising increase was partly buoyed by the component tracking current sales conditions, which went up from 52 in February to 56 in March. Components measuring sales expectations in the next six months and the flow of potential buyers also increased, climbing to 62 and 34 respectively in March.

In a related development, the Commerce Department is slated to release a separate report on new residential construction for February. It is anticipated that housing starts, which dropped to a rate of 1.331 million in January, will rebound to an annual rate of 1.435 million in February. In similar vein, building permits, which are a predictor of future housing demand, are expected to rise to a rate of 1.500 million in February, recovering from a 1.470 million rate in January.