The National Association of Home Builders housing market index took a nose dive in February, missing expectations by a mile and falling sharply, down a record 10 points to a much weaker-than-expected 46 which is the lowest reading since May last year.
NAHB says that this winter's severe weather has been holding down certain areas of the economy more than others, and especially holding down housing. HousingWire has covered this issue – whether the weather is really a factor or if it’s just an excuse.
“Significant weather conditions across most of the country led to a decline in buyer traffic last month,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor.”
The reading is far below the low-end Econoday estimate of 54. The traffic component fell 11 points to a very weak 31 which is the lowest reading since April. As evidenced in the below chart, confidence normally dips in winter months, this time, however, it's fairly severe.
The component for current sales slowed substantially, also down 11 points but to a still plus-50 level of 51 that indicates monthly growth. Future sales fell 6 points to a still respectable 54. The regional breakdown shows broad weakness especially in the Northeast.
The strongest region remains the West where California has been mostly spared by heavy weather, but it is still sharply down.
Aside from the weather, other factors are still negative for the sector including unappealing mortgage rates, high prices, low supply, and a soft jobs market.
Housing starts for January, which slipped in December following a surge in November, will be posted Wednesday morning.
HousingWire will have the coverage.
Derived from a monthly survey that NAHB has been conducting for 25 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 of the major HMI components declined in February. The component gauging current sales conditions fell 11 points to 51, the component gauging sales expectations in the next six months declined six points to 54 and the component measuring buyer traffic dropped nine points to 31.