Builder Confidence Continues Retreat from 2014 Levels

Builder confidence in the market for newly built, single family homes has declinedrnto its lowest level in nine months.  ThernNational Association of Home Builders (NAHB)/Wells Fargo Housing Market Indexrnfell two points to 53 in March, an HPI level last seen in July 2014.  In was the third time in as many months thatrnthe HPI has declined, coming off of the 2014 high of 58 posted in the last twornmonths of the year. </p

 “The drop in builder confidence is<blargely attributable to supply chain issues, such as lot and labor shortages asrnwell as tight underwriting standards,” said NAHB Chief Economist David Crowe.rn”These obstacles notwithstanding, we are expecting solid gains in the housingrnmarket this year, buoyed by sustained job growth, low mortgage interest ratesrnand pent-up demand.” </p

NAHB compiles the HPI from results of a survey it has conducted for 30rnyears.  The association asks its memberrnbuilders to gauge their perception of both current single-family home sales andrnsales expectations for the next six months as “good,” “fair” or “poor.”  It also asks builders to rate traffic ofrnprospective buyers as “high to very high,” “average” or “low to very low.”rnScores for each component are then used to calculate a seasonally adjustedrnindex where any number over 50 indicates that more builders view conditions asrngood than poor.</p

Two of the three HMI components posted losses in March and all three arernlower than at the end of 2014. The component gauging current sales conditions hasrnalso declined for three straight months and fell three points in March to 58.  The component measuring buyer traffic droppedrntwo points to 37, also the third consecutive decline. That component has notrnmet the benchmark level of 50 since the end of 2004.  The gauge charting sales expectations in thernnext six months held steady at 59 but is 5 points below the December 2014rnlevel.</p

Looking at the three-month moving averages for regional HMI scores, thernNortheast and South each posted a two-point drop to 43 and 55, respectively.rnThe Midwest rose two points to 56, while the West fell seven points to 61.</p

NAHB Chairman Tom Woods said, “Even with this slight slip, the HMI remainsrnin positive territory and we expect the market to improve as we enter thernspring buying season.”

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