The Home Buyer's Korner

Information presented should be used for educational purposes only.

March 18th, 2015

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Builder Confidence Drops in March

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Builder confidence fell two points in March to a level of 53 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released this week. However, even with the drop HMI remains in positive territory and many housing analysts’ expect the market to improve as spring comes closer. The drop in builder confidence was mainly attributable to supply chain issues, being vacant lots and labor shortages.

The HMI index is derived from a monthly survey that the NAHB has conducted for 30 years and provides the general 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 used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good rather than poor.

Two of the three HMI components posted losses in March. The component gauging current sales conditions fell three points to 58 while the component measuring buyer traffic dropped two points to 37, which can most likely be attributed to harsh weather. The gauge charting sales expectations in the next six months held steady at 59.

Looking at the three-month moving averages for regional HMI scores, the Northeast, and South each posted a two-point drop to 43 and 55, respectively. The Midwest rose two points to 56 while the West fell seven points to 61.

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