Builder Confidence Ticks Up in April

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index EDGED UP one point in April to 63;
  • Two of the three component measures ROSE with only the outlook for sales six months forward slipping (1 point to 71);
  • By region, builder confidence INCREASED in three of the four Census Regions, falling only in the South (down four points to 66).


  • The overall Index has no fallen this year (it was unchanged from February to March);
  • After slipping at the end of 2018, the Index is at its highest level since October;
  • The Index has been positive (i.e. over 50) for 58 straight months;
  • Despite recent positive performance, the Index and its components, remain down year-year.

Data Source: National Association of Home Builders

Image result for new home sales

Despite relatively weak home sales, the Housing Market Index, which reflects builder confidence in the market for newly-built single-family homes, rose one point in April, climbing to 63 (out of 100), its highest level since last October.

The confidence index increase came against a backdrop of mixed results for new home sales which rose in February (the latest report from the Commerce Department) but are virtually flat to one year ago. That said, the National Association of Home Builders (NAHB) which compiles the index is optimistic about home sales.

The optimism flies in the face of a new study by the New York Federal Reserve which found the December 2017 tax act which capped the deductions related to homeownership. According to the New York Fed study in “Liberty Street Economics” its research newsletter, new home sales fell 7.6 percent from 4Q 2017 through 3Q 2018. From 2Q 2016 through 1Q 2017, new home sales rose 10.3 percent.

“While certainly not conclusive, the evidence,” the NY Fed study concluded, “is consistent with the view that changes in federal tax laws enacted in December of 2017 have contributed to the slowing of housing market activity that occurred over the course of 2018.”

The 2017 tax changes imposed a $10,000 cap on the deductibility of state and local taxes (i.e., real estate taxes) as well as lower limits for the amount of mortgage debt qualifying for the deductibility of mortgage interest.

According to the confidence index, the outlook for sales six months out scored an impressive 71 (our of 100) in April, down only one point from March and the measure of buyer traffic, would-be consumers visiting model homes, rose to 47 from 44 in March.

Regionally, confidence rose in all regions except the South.

Meanwhile, a study by national real estate network Clever real Estate found a relationship between the legalization of marijuana and home values, though not necessarily causation.

According to the study

  • Cities that allow retail dispensaries saw home values increase $22,888 more than cities where marijuana is illegal from 2014 to 2019 (controlling for population and initial home values)
  • In cities where only medicinal marijuana is legal, home values increased at a comparable rate to cities where marijuana is illegal.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.

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