The NAHB/Wells Fargo Housing Market Index fell 2 points to 65 in February suggesting that builders in the newly built single family home market remain optimistic but the index is giving back part of its post-election surge.
“While builders remain optimistic, we are seeing the numbers settling back into a normal range,” said National Association of Home Builders (NAHB) Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “Regulatory burdens remain a major challenge to our industry, and NAHB looks forward to working with the new Congress and administration to help alleviate some of the pressures that are holding small businesses back and making homes less affordable.”
According to Wells Fargo Securities, declines were broad based across the index’s components. Prospective buyers’ traffic accounted for the bulk of the headline’s drop, as the measure fell 5 points on the month. Home builders continue to report difficulty reducing costs as supply side restrains, including labor shortages, are continuing to fuel price gains.
“With much of the decline this month resulting from a decrease in buyer traffic, builders continue to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages,” said NAHB Chief Economist Robert Dietz. “Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed.”
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.
All three HMI components fell in February. The component gauging current sales conditions dipped one point to 71, and the index charting sales expectations in the next six months registered a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 50 and the Midwest rose one point to 65. The South dipped one point to 67 and the West held steady at 79 for the third month in a row.
Despite the challenges that remain, Wells Fargo expects steady gains in single-family homebuilding in 2017.
