March Builder Confidence Declines Amid Rising Risks
Builder confidence in the market for newly built single-family homes fell two points to 72 in March, the National Association of Home Builders reported yesterday.
NAHB/Wells Fargo Housing Market Index gauging current sales conditions fell two points to 79; the component measuring sales expectations in the next six months dropped four points to 75; and the gauge charting traffic of prospective buyers also decreased one point to 56.
Looking at regional three-month moving averages, the Midwest fell two points to 66, the South fell by one point 77 and the West posted a one-point decline to 82. The Northeast rose two points to 64. A score above 50 indicates builders view conditions as more favorable.
“Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus,” said NAHB Chairman Dean Mon. “Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders.”
“It is important to note that half of the builder responses in the March HMI were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will be reflected more in next month’s report,” said NAHB Chief Economist Robert Dietz. “Overall, 21% of builders in the survey report some disruption in supply due to virus concerns in other countries such as China. However, the incidence is higher (33%) among builders who responded to the survey after March 6, indicating that this is an emerging issue.”
Earlier this week, the Mortgage Bankers Association reported mortgage applications for new home purchases in February increased by nearly 26 percent from a year ago, although it dipped by 1 percent from January.
The MBA Builder Applications Survey said by product type, conventional loans composed 69.3 percent of loan applications in February, FHA loans composed 18.5 percent, RHS/USDA loans composed 0.8 percent and VA loans composed 11.4 percent. The average loan size of new homes decreased from $346,140 in January to $340,169 in February.
MBA estimated new single-family home sales at a seasonally adjusted annual rate of 746,000 units in February, based on data from the BAS, a decrease of 13.8 percent from January (865,000 units). On an unadjusted basis, MBA estimated 64,000 new home sales in February, a decrease of 3 percent from 66,000 new home sales in January.