Home Builder Index Jumps to 12-Year High
The spring home buying season got off to an early start this month, the National Association of Home Builders reported yesterday, as builder confidence reached a 12-year high.
The NAHB/Wells Fargo Housing Market Index reported builder confidence in the market for newly built single-family homes jumped six points to 71 in March, the highest reading since June 2005. All three HMI components posted strong gains: the component gauging current sales conditions increased seven points to 78, while the index charting sales expectations in the next six months rose five points to 78. Meanwhile, the component measuring buyer traffic jumped eight points to 54.
Regionally (on a three-month rolling average), the Midwest increased by three points to 68, while the South rose by one point to 68. The West fell by three points to 76 and the Northeast dropped one point lower to 48.
Mark Vitner, senior economist with Wells Fargo Securities, noted builder confidence was boosted by the strong sales across much of the country.
“The month’s surge in confidence likely reflects unseasonably mild weather in February and early March, which pulled spring home buying forward,” he said. “The jump in homebuilders’ sentiment coincides with much stronger readings in home improvement center sales in today’s retail sales report, suggesting homebuilding is making a larger contribution to first quarter real GDP growth.”
“While builders are clearly confident, we expect some moderation in the index moving forward,” said NAHB Chief Economist Robert Dietz. “Builders continue to face a number of challenges, including rising material prices, higher mortgage rates and shortages of lots and labor.”
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.
On Tuesday, The Mortgage Bankers Association’s Builder Application Survey reported mortgage applications for new home purchases increased in February by 16 percent and improved by 2.2 percent from a year ago. Conventional loans composed 66.5 percent of loan applications, FHA loans composed 18.6 percent, RHS/USDA loans composed 1.3 percent and VA loans composed 13.6 percent. The average loan size of new homes increased from $329,806 in January to $330,208 in February.
“The surprisingly strong employment numbers for the beginning of 2017 suggest that demand for new homes should continue to grow this year,” said MBA Vice President of Research and Economics Lynn Fisher.
