One of the components of the Index of Leading Economic Indicators is homebuilder confidence, which has dropped again, for the fourth consecutive month. This is not good news. However, there are good reasons for it! There is ample demand for new homes, but there is a shortage of lots to build on and almost none of those are conveniently located for homebuyers. Plus, our country is having a trade dispute with Canada, which is the biggest exporter of lumber to the U.S. The cost of that lumber is rising rapidly, increasing the cost of housing and making them less affordable.
So, if you’re a homebuilder facing a shortage of lots and rising prices, what do you do? Build condos? Oh, did I mention that interest rates are rising? Maybe, NOW would be a good time to buy a home?
This is just another indication that the economy remains strong, maybe too strong. Behind this good economic news, we can expect the financial data from homebuilders to suffer. You see, good economic news can produce bad financial news . . .