Builder confidence in the market for newly-built single-family homes declined two points in February to a level of 65 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
The HMI had risen sharply in December 2016 (up to 69) as the election results raised hopes among builders that a new Congress and administration will help create a better business climate for small businesses, particularly with respect to improving regulatory costs, which increased more than 29% over the last five years.
Much of the decline this month stems from a decrease in buyer traffic. Yet an overall HMI of 65 shows that builders remain optimistic for the year ahead, despite continuing to struggle to find lots and labor while keeping costs under control.
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.
All three HMI components fell in February. The component gauging current sales conditions dipped one point to 71, and the index charting sales expectations in the next six months registered a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 50 and the Midwest rose one point to 65. The South dipped one point to 67 and the West held steady at 79 for the third month in a row.
The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi.