Builders’ sentiment remained unchanged in March at 58. The NAHB/Wells Fargo Housing Market Index (HMI) has been between 52 and 65 since July 2015. Any value above 50 means more builders are seeing improvement rather than decline. The component index measuring current sales was also unchanged at 63 and the component measuring expectations was down three points to 61. The traffic component did increase four points to 43 as many builders experienced greater model home visits as the weather begins to change.
The stable but modest level of sentiment aligns with recent construction and sales reports. January single-family start and permits were down slightly but remained well above the 2015 annual averages. New homes sales were also off in January but from an elevated December and driven by an unusually large drop in the West that is expected to be reversed.
Builders remain concerned about the availability and cost of labor and land. Higher costs for those two elementary feeds into home building are driving up the price of homes and making it even more difficult to answer the budding demand from first time home buyers. Increased equity in the hands of existing home owners allow those buyers to trade up but still leaves the first time buyer stretched.
The March reading of the HMI is in line with NAHB’s expectation for a modest but steady increase in home sales as buyers do begin to leave their winter hibernation, look around for new home options and finally break that pent up demand dam.