Builder Confidence Holds Strong in March Housing Market Index

Roofers work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada April 5, 2013. (Photo: Reuters)

Builder confidence in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) shed only one point to a still-strong 70 in March. The sustained strength in homebuilder sentiment toward single-family homes is welcomed news, as supply shortages on the market are driving prices up and sales down.

“Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”

The HMI component gauging current sales conditions held steady at 77, the chart measuring sales expectations in the next six months dropped two points to 78, and the index gauging buyer traffic fell three points to 51.

“A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise,” said NAHB Chief Economist Robert Dietz. “With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”

Regionally, the three-month moving average for the Northeast rose one point to 57. The three-month moving average for the South fell one point to 73, while the three-month moving average for the West fell 2 points to 79 and 4 points to 68 in the Midwest.

About the Survey

The NAHB/Wells Fargo Housing Market Index (HMI) has been gauging builder confidence, otherwise known as homebuilder sentiment, for roughly 30 years. It rates current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The HMI 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.