Builder confidence in the new, single-family home construction market slipped just one point to a level of 70 in March, according to the latest data from the National Association of Home Builders (NAHB).
Despite the small decline in the March NAHB/Wells Fargo Housing Market Index (HMI), the data reflects continued strength in builder confidence for the new homes market across the nation.
“Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market,” said NAHB Chairman Randy Noel in a statement published on the NAHBNow blog. “However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”
Fewer lots available for new home construction could also signal a rise in land values and the homes themselves. This combined with the likelihood of interest rates rising in the near future could potentially threaten affordability. Still, for now, builders are remaining confident in the market’s solidity, in part because of the favorable outlook on higher wages and a strengthening job market.
“A strong labor market, rising incomes and a growing economy are boosting demand for homeownership, even as interest rates rise,” said Robert Dietz, NAHB chief economist. “With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”
About the NAHB/Wells Fargo Housing Market Index (HMI)
The HMI is derived from a monthly survey the NAHB has been conducting for 30 years. The survey 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.” Each component of the HMI is scored and used to calculate a seasonally adjusted index where any number higher than 50 indicates that more builders view conditions as good than poor.
The HMI component measuring current sales conditions remained unchanged at 77, while the chart measuring sales expectations for the next six months fell two points to 78. Clearly, even with the slight drop, sales appear to be in solidly positive territory.
The index measuring buyer traffic dropped three points to 51, coming the closest to falling below the 50-point threshold.
Regionally, HMI scores are observed on three-month moving averages. In the latest HMI regional evaluation, the Northeast rose one point to 57, the South fell one point to 73, the West dropped two points to 79 and the Midwest fell four points to 68.