Improvement in U.S. Homebuilder Sentiment Belies Cost Concerns

(Bloomberg) -- Confidence among U.S. homebuilders improved slightly in February as the allure of low interest rates generated more prospective buyer traffic even as rising construction costs threaten to slow demand.

A gauge of builder sentiment rose to 84 from a January reading of 83, National Association of Home Builders data showed Wednesday. The figure was firmer than the median forecast of 83 in Bloomberg’s survey of economists.

Thirty-year mortgage rates that have averaged less than 3% since the end of July remain a key source of strength for residential real estate. At the same time, NAHB members say that soaring costs of building materials, especially lumber, are making new homes unattainable for many.

“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,” Robert Dietz, NAHB chief economist, said in a statement.

A gauge of prospective buyer traffic increased by 4 points to 72 in February. At the same time, a measure of builder expectations for the next six months declined to a six-month low of 80. Builders also reported no change in current single-family home sales.

Another report Wednesday showed an index of mortgage applications to purchase homes fell last week to the second-lowest level since the end of May.

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