The NAHB/Wells Fargo Housing Market Index (HMI) continued its pause in February with an index value of 46, down one point from the December and January level of 47. Builders remain just shy of the 50 mark where a majority of builders are optimistic versus those that are not. Nevertheless, the index was rising consistently from April to December 2012 as builders saw more serious buyers in their models and offices. The plateau in the most recent three months reflects consumers rechecking their own economic outlook and discerning their ability to pay a mortgage over the next 30 years.
The individual components within the HMI varied in movement. Expectations for future sales increased one point to 50 while current sales declined one point to 51; both remaining above 50. The traffic component dropped four points to 32. Two regions advanced and two declined; the Northeast and West rose three and four points respectively while the Midwest and South dropped two points each. All the regional indexes are based on a three month moving average.
While the housing market has seen substantial improvement over the past year, there are a number of hurdles remaining that will keep the recovery from accelerating. NAHB expects single-family construction to advance at about the same rate in 2013 as it did in 2012, or about a 23 percent gain year-over-year. Consumers still find obtaining a mortgage difficult as underwriting standards remain restrictive and home sales continue to be squashed because of low appraisals inaccurately driven by distressed sales. A more consistent economic and job recovery will also add to consumer confidence and help move those on the fence to a purchase.