Builder Sentiment Holds Steady, But Optimism for Future Sales Drops

The National Association of Home Builders reported yesterday that builder confidence in the market for newly built single-family homes remained unchanged in March.

The NAHB/Wells Fargo Housing Market Index held steady at 58; any number above 50 indicates that more builders view conditions as good than poor. The component gauging current sales conditions held steady at 65, while the index measuring sales expectations in the next six months fell three points to 61. The component charting buyer traffic rose four points to 43.

Regionally, the Midwest posted a one-point gain to 58 while the South was unchanged at 59. The West registered a three-point decline to 69 while the Northeast fell one point to 46.

“Confidence levels are hovering above the 50-point mid-range, indicating that the single-family market continues to make slow but steady progress,” said NAHB Chairman Ed Brady. “However, builders continue to report problems regarding a shortage of lots and labor.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said consensus expectations called for a slight gain. He noted that the future sales index has dropped by 14 points from its cycle high of 75 in October 2015. “While builder sentiment has moderated recently, the index remains well above the 50 demarcation line, signaling steady gains in the single-family housing market in 2016,” he said.

Last week the Mortgage Bankers Association reported mortgage applications for new home purchases in February increased by 24 percent from January. The MBA survey tracks application volume from mortgage subsidiaries of home builders enabling MB to provide an early estimate of new home sales volumes at the national, state and metro level.