NAHB/Wells Fargo Housing Market Index of Homebuilder Sentiment Falls Lower Than Views

The National Association of Home Builder’s gauge of homebuilder sentiment slipped to 58 in February from 61 the month prior, the lowest reading since May. Economists had expected a smaller decline to 60 in the NAHB/Wells Fargo Housing Market Index (HMI) for February.

“Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “Of note, they expressed optimism that sales will pick up in the coming months.”

The NAHB/Wells Fargo Housing Market Index (HMI) 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.”

The HMI component measuring sales expectations in the next six months gained by just one point to 65 in February, while the index measuring current sales condition fell 3 points to 65. The component for buyer traffic dropped 5 points to 39.

“Builders are reflecting consumers’ concerns about recent negative economic trends,” said NAHB Chief Economist David Crowe. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.”

Meanwhile, all four regions saw their three-month moving averages for the regional HMI register slight declines. The Midwest fell one point to 57, the West registered a 3-point decline to 72 and the Northeast and South each posted a 2-point drop to 47 and 59, respectively.