Home Builders Still See Tough Road Ahead

April 20, 2012 (Jeff Alan)

The nation’s new home builders still see a tough road ahead as potential buyers continue to face a multitude of home buying challenges and economic uncertainties that has left them hesitant to sign contracts for new home purchases according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for March.

The HMI is derived from a survey that the National Association of Home Builders (NAHB) has been conducting for over 20 years. The index gauges builder perceptions of current single family home sales and sales expectations for the next six months as “good, fair, or poor.” Builders are also asked to rate traffic of prospective buyers as “high to very high, average or low to very low.” Each component is then used to calculate a seasonally adjusted index where a score over 50 indicates builder’s view sales conditions as good.

The index fell three points to 25 in March from 28 in February and follows six consecutive months in which the HMI either recorded an increase or remained unchanged.

Barry Rutenberg, chairman of NAHB, stated, “Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts.”

The three components that make up the HMI fell for the month with the component gauging sales expectations over the next six months falling three points to 32 from a revised 35 in February. March’s loss follows a four point gain in February.

The component gauging current sales conditions also fell three points, from a revised 29 the previous month to 26 in March, and the component gauging traffic of prospective buyers declined from 22 in February to 18 in March.

Only one of the four regions in the HMI posted a gain for the month. The Northeast reported a gain of four points to 29, the highest level for that region since May 2010, while the West remained unchanged at 32. The South fell three points to 24 while the Midwest suffered the worst decline, eight points, and fell to 23.

NAHB Chief Economist David Crowe stated, “What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September. This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”

Tags: NAHB, Wells Fargo, Housing Market Index, HMI, homebuilders, sales expectations, builder confidence, single-family homes

Source:
NAHB