The National Association of Home Builders monthly housing market index took a dramatic dive in February, and gained back one point in March, far below analyst expectations.
The HMI ticked up to 47, the second-lowest it has been since May 2013. NAHB says the primary culprit is the weather.
“Significant weather conditions across most of the country led to a decline in buyer traffic last month,” said NAHB Chairman Kevin Kelly. “Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor.”
The full report can be viewed here.
The NAHB 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.
Details for March once again show serious weakness in traffic, at 33 vs February's 31. Weakness in traffic points to a lack of first-time buyers and underscores the continued importance of all cash buyers in the housing market.
Other details are on the plus side of 50 to indicate monthly growth but just barely, at 52 for current sales and 53 for future sales. The regional breakdown shows little separation except for the Northeast which lags badly but which however is by far the smallest region for new homes.
New home sales, which had been badly depressed, surged in January but this report points only to incremental growth for February and March. And the traffic component of this report points to a lack of sales growth in the months ahead. Watch for housing starts and permit data tomorrow morning on the Econoday calendar, both of which are expected to bounce back.
“A number of factors are raising builder concerns over meeting demand for the spring buying season,” said NAHB Chief Economist David Crowe. “These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”