On the cusp of the spring buying season, homebuilder confidence shows it is wavering after several months of steady climbing. Builder confidence in the market for newly built, single-family homes paused for a third consecutive month in March, with a two-point reduction to 44 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
“Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor,” said NAHB Chairman Rick Judson, a homebuilder from Charlotte, N.C. “At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals.”
While the HMI component gauging current sales conditions declined four points to 47, the component gauging sales expectations in the next six months and the component gauging traffic of prospective buyers both posted gains, of one point to 51 and three points to 35, respectively, in March.
“Homebuilding is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself,” explained NAHB Chief Economist David Crowe. “During the Great Recession, the industry lost homebuilding firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year.”
Three-month moving averages for each region’s HMI score were also mixed, with the Northeast holding unchanged at 39, the Midwest and South posting one-point declines to 47 and 46, respectively, and the West registering a four-point increase to 58.
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as ”high to very high,” “average” or “low to very low.” Scores from 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.