Builder confidence continued its steady decline in February, gradually falling back to a normal range, according to the National Association of Home Builders and Wells Fargo Housing Market Index.
Builder confidence in the market for newly-built single-family homes declined two points in February to a level of 65, compared to 67 at the start of the year.
“While builders remain optimistic, we are seeing the numbers settling back into a normal range,” said NAHB Chairman Granger MacDonald, a homebuilder and developer from Kerrville, Texas.
“Regulatory burdens remain a major challenge to our industry, and NAHB looks forward to working with the new Congress and administration to help alleviate some of the pressures that are holding small businesses back and making homes less affordable,” he continued.
Derived from a monthly survey that NAHB has been conducting for 30 years, the 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 for 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.
All three HMI components fell in February. Broken up, the component gauging current sales conditions declined one point to 71, and the index charting sales expectations in the next six months registered a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.
The report also broke up the data by regions and looked at the three-month moving averages for regional HMI scores. The Northeast fell two points to 50, as the Midwest rose one point to 65. The South dipped one point to 67, and the West held steady at 79 for the third month in a row.
NAHB Chief Economist Robert Dietz noted that due to the decline in buyer traffic in February, builders continued to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages.
“Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed,” concluded Dietz.
