Builder confidence dipped a notch in February but still remains at elevated levels. The National Association of Home Builders (NAHB) says its Housing Market Index (HMI) which it sponsored with Wells Fargo, edged 1-point lower to 74. Even with this change, the Index remains high. Readings over the last three months represent the most optimistic outlook on the part of builders since December 2017. The HMI is the result of a survey conducted by NAHB each month among its new home builder members.
NAHB chief economist Robert Dietz said, "Steady job growth, rising wages and low interest rates are fueling housing demand in a market that lacks inventory, particularly at the entry-level. At a time when demand is on the rise, regulatory constraints along with a shortage of construction workers and a dearth of lots are hindering the production of affordable housing in local communities across the nation. And while lower mortgage rates have improved housing affordability in recent months, accelerating price growth due to limited inventory may offset some of that effect. Price growth in excess of income growth harms affordability.
The survey 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.
Each of the components was down 1 point compared to the results from the January survey. The index gauging current sales conditions was at 80, the component measuring sales expectations in the next six months dipped to 79 and the gauge charting traffic of prospective buyers was at 57.
Regional indices are reported as three month moving averages. The Northeast rose one point to 63, the Midwest increased one point to 67 and the South moved two points higher to 78. The West fell one point to 83.