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Daily News

Builder Confidence Virtually Unchanged in March
Mar 16, 2006
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A one-point decline in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for March indicates that housing demand and sales are gradually returning to a sustainable pace that is in-line with NAHB forecasts.

"Today's HMI provides the latest evidence of a predicted and orderly cooling process for the nation's single-family new-home market, which easily hit record highs in 2005," said NAHB President David Pressly.

Noting that the confidence gauge has remained within a narrow two-point range for 4 consecutive months following a retreat from its peak in mid-2005, NAHB Chief Economist David Seiders attributed March's slight downshift to eroding affordability conditions as well as a gradual withdrawal of investor demand in some areas.

"Rising interest rates and high rates of home-price appreciation have raised the bar for homeownership to beyond what some families can reach," he noted. "Meanwhile, a retreat of short-term investors from certain markets is helping restore equilibrium between supply and demand."

HMI Details
Derived from a monthly survey that NAHB has been conducting for nearly 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next 6 months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "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 sales conditions as good than poor.

March’s HMI, at 55, represented a one-point decline from February's downwardly revised 56 reading, which followed 2 consecutive months at 57. There was slight erosion of the index's three components in the latest report, with single-point declines in the gauges for current single-family sales and traffic of prospective buyers and a two-point decline in sales expectations for the next 6 months. Both the current and expected sales components remained well in the positive range, at 60 and 62, respectively.

Builder confidence declined in all regions but the Midwest in March, where it rebounded seven points to 39 from an exceptionally low point of 32 in February. Even so, the Midwest remained the region with the lowest confidence gauge, while the West remained the region with the strongest builder confidence (at 67) despite a six-point decline that erased a gain equal to that amount in February. The Northeast and South also remained in the positive range, with a two-point decline to 55 and a four-point decline to 58, respectively.

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