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March 18, 2019, 10:50 a.m. EDT

Home builder sentiment flat in March as housing headwinds linger

Sentiment is about where it was throughout 2016

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By Andrea Riquier

Bloomberg News/Landov
Contractors prepare the opening of a sliding glass door inside a new home under construction.

The numbers: The National Association of Home Builders’ monthly confidence index was unchanged at a seasonally adjusted reading of 62 in March, the trade group said Monday.

Any reading over 50 signals that more builders view conditions as good than poor.

What happened: The March reading snapped a two-month march upward, and keeps the index well below its 2018 full-year average of 67. Economists polled by Econoday had forecast a one-point increase to 63.

In March, the index that tracks current sales conditions rose 2 points to 68, and the gauge of sales over the next six months jumped 3 points to 71. The tracker that measures traffic of prospective buyers fell 4 points to 44.

Big picture: Economists consider the sentiment index an early read on future new construction. “Builders report the market is stabilizing,” NAHB said in a release. But “stabilizing” isn’t the same as “growing.” Builders know there’s demand for homes, but face a lot of familiar headwinds in getting their products to the segments of the market that need them.

Related: Home remodeling is a $450 billion market, and it’s only going to get bigger

And: Existing-home sales fall for third-straight month, hit a 3-year low

What they’re saying: It’s also possible, however, that builders aren’t heeding the realities of American households - or their budgets. “Home prices are up, not only because costs are higher, but also because new homes are, on average, bigger, and have been trending in that direction for a long time,” said analysts at RCLCO, a real-estate advisory, in a recent report . “There is a growing mismatch between the demographics of new households, the stated housing preferences of households active in the housing market, and the products and price points being offered to the market.”

From 2010 to 2017, the analysts wrote, “the average new home size increased over 300 square feet, adding about $40,000 to the average new home price.” That’s happening even as overall household sizes decline.

Market reaction: The 10-year U.S. Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -4.57%  , which sets the tone for fixed-rate mortgages, was little-changed after the data release, but has been drifting down in recent weeks. That will help more buyers afford homes.

Read : Mortgage rates skid to lowest level in a year

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July 10, 2020 6:29a

Andrea Riquier reports on housing and banking from MarketWatch's New York newsroom. Follow her on Twitter @ARiquier.

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