Photo: Robert Clark
Tariffs on Chinese materials used in homebuilding have US builders concerned about affordability, while remaining optimistic overall about the market, according to the September Housing Market Index from the National Association of Homebuilders (NAHB).
“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” writes NAHB chairman Randy Noel, in a statement.
The HMI is derived from a monthly survey conducted by NAHB that gauges builder perceptions of current single-family home sales and sales expectations for the next six months, as well as buyer traffic.
Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Single-family homebuilder confidence in the market remained unchanged from the previous month at a solid 67 reading in September.
The HMI component measuring current sales conditions rose one point to 74 and the component gauging future expectations increased two points to 74. Meanwhile, buyer traffic held steady at a reading of 49 — indicating “average” foot traffic.
“Builders are reasonably optimistic, but not to a greater extent than they have been over most of the past year. The reading of 74 is actually slightly lower than it was from last October through June,” NAHB’s Vice President of surveys and housing Paul Emrath tells Livabl.
Rising material costs have been exacerbated by the Trump administration’s trade war with first Canada and now China.
The administration imposed tariffs on Canadian lumber in summer 2016, and NAHB reports that record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.
And yesterday, the administration imposed an additional tariff on $200 billion worth of Chinese imports — including $10 billion on goods used by the residential housing sector.
“The president’s decision could have major ramifications for the housing industry. And with housing costs on the rise, this action translates into a tax increase on housing that will rise even more significantly on January 1st when the tariff rate jumps to 25 percent,” writes Noel.
NAHB, which is usually supportive of the administration, urged the president to think twice about the decision, claiming it is detrimental to the American people.
“With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing,” writes Noel.
Yet, as the fall buying season looms, builders have every reason to remain optimistic it will be a profitable one.
“A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” writes NAHB chief economist Robert Dietz in the report.
Click here to read the entire release.