PUBLISHED BY THE EL PASO ASSOCIATION OF BUILDERS : NATIONAL , STATE AND LOCAL HOME BUILDING INDUSTRY NEWS
edges higher in March , future outlook uncertain
Although high construction costs and elevated interest rates continue to hamper housing affordability , builders expressed cautious optimism in March as a lack of existing inventory is shifting demand to the new home market . Builder confidence in the market for newly built single-family homes in March rose two points to 44 , according to the National Association of Home Builders ( NAHB )/ Wells Fargo Housing Market Index ( HMI ) released today . This is the third straight monthly increase in builder sentiment levels . “ Even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions , they continue to report strong pent-up demand as buyers are waiting for interest rates to drop and turning more to the new home market due to a shortage of existing inventory ,” said NAHB Chairman Alicia Huey , a custom home builder and developer from Birmingham , Ala . “ But given recent instability concerns in the banking system and volatility in interest rates , builders are highly uncertain about the near- and mediumterm outlook .” “ While financial system stress has recently reduced long-term interest rates , which will help housing demand in the coming weeks , the cost and availability of housing inventory remains a critical constraint for prospective home buyers ,” said NAHB Chief Economist Robert Dietz . “ For example , 40 % of builders in our March HMI survey currently cite lot availability as poor . And a follow-on effect of the pressure on regional banks , as well as continued Fed tightening , will be further constraints for acquisition , development and construction ( AD & C ) loans for builders across the nation . When AD & C loan conditions are tight , lot inventory constricts and adds an additional hurdle to housing affordability .” Meanwhile , the HMI survey shows that builders had better than anticipated new home sales during the past two months because of continued use of incentives and price discounts . Thirty-one percent of builders said they reduced home prices in March , the same share as in February , but lower than the 36 % that was reported last November . And 58 % provided some type of incentive in March , about the same as the 57 % who did in February , but lower than the 62 % of builders who offered incentives in December . Derived from a monthly survey that NAHB has been conducting for more than 35 years , the NAHB / Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “ good ,” “ fair ” or “ poor .” The survey 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 . The HMI index gauging current sales conditions in March rose two points to 49 and the gauge measuring traffic of prospective buyers increased three points to 31 . This marks the strongest traffic reading since September of last year . The component charting sales expectations in the next six months fell one point to 47 . Looking at the three-month moving averages for regional HMI scores , the Northeast rose five points to 42 , the Midwest edged one-point higher to 34 , the South increased five points to 45 and the West moved four points higher to 34 . HMI tables can be found at nahb . org / hmi . More information on housing statistics is also available at Housing Economics PLUS ( formerly housingeconomics . com ).