Record Decline in Builder Confidence

The National Association of Homebuilders (NAHB)rnprovided a number of explanations for a record drop in the NAHB/Wells FargornHousing Market Index (HMI) this month.  Unusuallyrnsevere weather, a dearth of available building lots, and supply chain and laborrnproblems led to a 10 point drop in the composite index which measures builder confidencernin the market for newly-built, single-family homes.  </p

The HMI dropped to 46 in the most recent survey of home builder which NAHBrnhas been conducting for 25 years. rnBuilders are asked to gauge their perceptions of current single-familyrnhome sales and sales expectations for the next six months as “good,” “fair” orrn”poor,” and to rate traffic of prospective buyers as “high to very high,”rn”average” or “low to very low.” Scores for each component are then used torncalculate a seasonally adjusted index where any number over 50 indicates thatrnmore builders view conditions as good than poor.</p

All three of the major HMI components also declined in February. Therncomponent gauging current sales conditions fell 11 points to 51, the componentrngauging sales expectations in the next six months declined six points to 54 andrnthe component measuring buyer traffic dropped nine points to 31.</p

“Significant weather conditions across most of the country led to a declinernin buyer traffic last month,” said NAHB Chairman Kevin Kelly.  “Builders also have additional concerns aboutrnmeeting ongoing and future demand due to a shortage of lots and labor.”</p

“Clearly, constraints on the supply chain for building materials, developedrnlots and skilled workers are making builders worry,” said NAHB Chief EconomistrnDavid Crowe. “The weather also hurt retail and auto sales and this had arncontributing effect on demand for new homes.”</p

Looking at three-month moving averages for regional HMI scores, the West wasrnunchanged at 63 in February while the Midwest registered a one-point decline torn57, the South registered a three-point decline to 53 and the Northeast posted arnfour-point decline to 38.</p

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