Home builders continue to sound an overall positive note regarding the ongoing strength of the market for newly built single-family homes in February, according to the National Association of Home Builders/Wells Fargo Housing Market Index, released Feb. 15. Though unusually wet weather conditions across much of the country helped push the index down two points in February, builder expectations for the next six months held steady from the beginning of the year.
“On the whole, builders are still expressing very positive views of conditions in the housing market. Mortgage interest rates have actually improved since January, and builder confidence as measured by the HMI is ahead of where it was this time last year,” said NAHB President Dave Wilson, a custom home builder from Ketchum, Idaho.
“The main concern builders are citing right now pertains to availability and pricing of lots for development, which itself is a symptom of strong buyer demand,” agreed NAHB Chief Economist David Seiders. “Demand, in turn, continues to be driven by solid job and income growth, low mortgage rates and the investment aspects of homeownership.”
The NAHB/Wells Fargo Housing Market Index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Each month, builders report current sales of single-family homes and prospects for sales in the next six months as either “good,” “fair” or “poor.” They also 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 sales conditions as good than poor.
Due entirely to a three-point dip in the index component gauging current sales activity, the HMI declined two points to 68 in February. That dip was most likely related to above-average precipitation that was not wholly accounted for by the index’s seasonal adjustment factors—indeed, some builders surveyed for the HMI mentioned the weather as a factor. Even so, the current-sales component still posted a solid 74 reading, while the components gauging expected sales in the next six months and traffic of prospective buyers held steady at 78 and 50, respectively.
Regional HMI scores were mixed in February. With a two-point decline in their HMI to 79, builders in the Western United States were nevertheless still the most optimistic of their colleagues across the nation. Southern and Midwestern builders each posted one-point HMI declines, to 73 and 54, respectively, while builders in the Northeast posted a two-point gain to 67.
