The National Association of Home Builders (NAHB) publishes a monthly Housing Market Index (HMI – also known as Builder Confidence) based on a survey of its members designed to assess the state of the single-family housing market. The report is published mid-month and covers activity for the first half of the same month. The HMI is a weighted average of the results of questions on current conditions, future expectations, and current prospect traffic for single-family homes and is a strong measure of builder confidence.
The latest HMI for March came in at 44, up two points from February and better than forecasted. While still in contraction (< 50), this is an improvement from last month, and builders are cautiously optimistic despite the lack of inventory shifting from existing to new homes. There is also significant uncertainty surrounding the near future. Here’s an excerpt from NAHB’s latest blog post:
“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.”
Additionally, it’s worth noting that the NAHB Traffic of Perspective Buyers Index has also seen a slight rebound, though this may be due to falling home prices – just as it was in 2006.