Builder confidence in the market for newly built, single family homes has declined
to its lowest level in nine months. The
National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index
fell two points to 53 in March, an HPI level last seen in July 2014. In was the third time in as many months that
the HPI has declined, coming off of the 2014 high of 58 posted in the last two
months of the year.
“The drop in builder confidence is
largely attributable to supply chain issues, such as lot and labor shortages as
well as tight underwriting standards,” said NAHB Chief Economist David Crowe.
“These obstacles notwithstanding, we are expecting solid gains in the housing
market this year, buoyed by sustained job growth, low mortgage interest rates
and pent-up demand.”
NAHB compiles the HPI from results of a survey it has conducted for 30
years. The association asks its member
builders to gauge their perception of both current single-family home sales and
sales expectations for the next six months as “good,” “fair” or “poor.” It also asks builders to rate traffic of
prospective buyers as “high to very high,” “average” or “low to very low.”
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.
Two of the three HMI components posted losses in March and all three are
lower than at the end of 2014. The component gauging current sales conditions has
also declined for three straight months and fell three points in March to 58. The component measuring buyer traffic dropped
two points to 37, also the third consecutive decline. That component has not
met the benchmark level of 50 since the end of 2004. The gauge charting sales expectations in the
next six months held steady at 59 but is 5 points below the December 2014
Looking at the three-month moving averages for regional HMI scores, the
Northeast and South each posted a two-point drop to 43 and 55, respectively.
The Midwest rose two points to 56, while the West fell seven points to 61.
NAHB Chairman Tom Woods said, “Even with this slight slip, the HMI remains
in positive territory and we expect the market to improve as we enter the
spring buying season.”