U.S. homebuilder confidence plunged in April to the lowest level since 2012 as the COVID-19 pandemic disrupted the economy and kept most buyers at home.
An index measuring homebuilder sentiment tumbled to 30 from a reading of 72 in March, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Wednesday. It was the biggest monthly drop on record.
“This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities,” said NAHB Chairman Dean Mon.
A subset of data showing current sales conditions dropped 43 points to 36, while a measure of sales expectations in the next six months fell 39 points to 36, NAHB said. An index measuring traffic of prospective buyers tumbled 43 points to 13.
“The April readings show builders facing a number of challenges – it’s traffic from prospective buyers, but it’s also business-side challenges like permit approvals, inspections, supply-chain issues and building material availability,” said Robert Dietz, NAHB’s chief economist.
Measured by region, the Northeast registered the lowest level of confidence, tumbling 45 points to 19. That area includes New York and New Jersey, the states that have recorded the highest number of COVID-19 deaths.
The Midwest dropped 42 points to 25, the South fell 42 points to 34 and the West dropped 47 points to 32.
If the spread of the virus can be mitigated with testing and tracing, demand for new homes could rebound in the second half of 2020 because of the shortage of properties in the months prior to the pandemic, Dietz said.
“That’s what makes this crisis in housing different from a decade ago – we’re in an underbuilt market, with short supply, unlike a decade ago when we were overbuilt,” Dietz said. “That means housing has the potential to come back quickly and be one of those sectors that will hopefully lead the economy into a rebound.”