Builder confidence falls slightly
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today, builder confidence in the market for newly built, single-family homes fell one point to 46 in February, which the NAHB refers to as “virtually unchanged.”
Although any reading under 50 means that more builders are pessimistic about the market than optimistic, the index hit a ten year high last July, and continued to climb through the end of 2012. Current readings show a split in the market, with roughly half reporting optimism, the other half reporting pessimism.
“Partly due to ongoing uncertainties”
“Following solid gains over the past year, builder confidence has essentially leveled out and held in the same three-point range over the last four months,” noted NAHB Chairman Rick Judson. “This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit, but it’s also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens.”
“Having risen strongly in 2012, the HMI hit a slight pause in the beginning of this year as builders adjusted their expectations to reflect the pace at which consumers are moving forward on new-home purchases,” observed NAHB Chief Economist David Crowe. “The index remains near its highest level since May of 2006, and we expect home building to continue on a modest rising trajectory this year.”
Builder confidence falls, but not in all categories
The HMI component measuring current sales fell one point to 51 in February, and builder confidence in traffic of prospective buyers fell four points to 32. Builders aren’t eternally pessimistic, however, as shown in the HMI component gauging sales expectations for the next six months which actually rose by one point to 50.
According to the NAHB, “Three-month moving averages for each region’s HMI score were mixed in February, with the Northeast up three points to 39 and the West up four points to 55 and the Midwest and South each down two points, to 48 and 47, respectively.”
In January of this year, the HMI didn’t budge up or down, and what we reported at that time remains true. “With lending conditions remaining tight and economic uncertainties stifling all industries, the housing sector remains in a challenging position as it marches down the long road to recovery, so builder confidence remaining unchanged is good news in light of the massive challenges on builders’ minds.”