Builder Confidence in Market Inches Down in March
The NAHB/Wells Fargo Housing Market Index (HMI) has moved down one point this month, indicating that housing demand and sales are gradually cooling from overheated levels to a more sustainable pace.
"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 four consecutive months since declining 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."
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, sales expectations for the next six months and the traffic of prospective buyers, with any number over 50 indicating that more builders view sales conditions as good than poor.
The March HMI registered 55, down from a revised February reading of 56, with one-point declines in the index’s single-family sales and prospective buyer components and a two-point drop in the six-month sales outlook. Both the current and expected sales remained well in the positive range, at 60 and 62, respectively.
Regionally, builder confidence this month slid everywhere but the Midwest, which remained the gloomiest part of the country despite a seven point index gain, to 39, from February. While the confidence of builders in the West skidded six points in March, it remained the highest of the four regions, at 67. The Northeast was down two points to 55 and the South down four points to 58.
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