Homebuilder confidence weakened in March as economic uncertainties mounted, according to the Housing Market Index.
Sentiment declined by two points to 72 in March, the third consecutive retreat, according to a report Tuesday from the National Association of Home Builders and Wells Fargo. A reading of 50 is the midpoint between positive and negative sentiment.
Despite March’s decline, NAHB Chairman Dean Mon said sentiment remains strong because low mortgage rates are expected to boost demand in a market with limited inventory.
“Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus,” Mon said. “Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders.”
During March, the index measuring current sales conditions fell to 79 points, while buyer traffic decreased slightly, to 56 and sales expectations over the next six months dropped to 75 points.
The three-month moving averages for regional HMI scores show that while the South fell to 77 points, the Midwest declined to 66 and the West decreased to 82 points, the Northeast increased to 64.
Half of the responses received from builders in the March HMI were collected prior to March 4, said NAHB Chief Economist Robert Dietz. The economic impact of the Coronavirus and recent stock market declines are likely to reflect more in next month’s report, he said.
“Overall, 21% of builders in the survey report some disruption in supply due to virus concerns in other countries such as China,” Dietz said. “However, the incidence is higher (33%) among builders who responded to the survey after March 6, indicating that this is an emerging issue.”
NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. Builders are also asked to rate prospective buyer traffic from very low to very high. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.
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