Home builder sentiment is up in February and National Association of Home Builders president Jerry Howard said the Federal Reserve's decision to back off raising interest rates may have improved consumer confidence in turn.
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However, Howard predicted "gray clouds on the horizon" as housing affordability hit a ten-year low, sending a mixed message to potential buyers.
When asked on FOX Business' "Varney & Co." why less people are buying houses in some areas, Howard cited home builders in California - who claim local and state government regulations are driving up home prices.
"I was with some California builders the other day, who told me that to build a new home in California for example, forty percent of the cost is in regulations," Howard told Stuart Varney on Tuesday. "That's one of the most unaffordable states in the union."
Those costs would get worse under a hypothetical Green New Deal, proposed by New York Democratic Rep. Alexandria Ocasio-Cortez. Howard said rent and home ownership costs would rise "outrageously" in the New York metro area if the government audited every home for its adherence to a new, environmentally-friendly code.
Homebuyers are also choosing smaller residences to make up for the increased cost, according to Howard.
"The size of an average new home has decreased roughly from 2500 square feet to 2300," he said. "And the reason for that is first time homebuyers are willing to sacrifice size in order to have technologically equipped houses."