Home Builders Remain Concerned about Spring Market

Builder confidence as measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) remained flat in March, rising only 1 point to 47 from February's level.  The three components of the index also changed only slightly although the directions were mixed. 

NAHB Chairman Kevin Kelly said, "The March HMI mirrors last month's sentiment, as builders continued to be affected by poor weather and difficulties in finding lots and labor."

"A number of factors are raising builder concerns over meeting demand for the spring buying season," according to the association's Chief Economist David Crowe. "These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale."

NAHB constructs the HMI from results of a survey it conducts monthly among its homebuilder-members.  Respondents are asked to give their perceptions of current single-family home sales and expectations for those sales over 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."   Each set of responses as well as the composite are used to calculate seasonally adjusted indices where any number over 50 indicates that more builders view conditions as good than poor.

The component gauging current sales conditions rose one point to 52 and the component measuring buyer traffic increased two points to 33. The component gauging sales expectations in the next six months fell one point to 53, its lowest level since May 2013.

Regional scores are computed as three-month moving averages and those averages for all four regions were down.  The Northeast dropped three points to 35, the Midwest three points to 53, the South posted a four-point decline to 49 and the West registered a two-point drop to 61.