Poor weather puts damper on builder confidence in February

Unusually severe weather conditions across much of the nation along with continued concerns over the cost and availability of labor and lots resulted in a 10-point drop in builder confidence.

By National Association of Home Builders February 27, 2014

Unusually severe weather conditions across much of the nation along with continued concerns over the cost and availability of labor and lots resulted in builder confidence in the market for newly-built, single-family homes to post a 10-point drop to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

"Significant weather conditions across most of the country led to a decline in buyer traffic last month," said NAHB chairman Kevin Kelly, a home builder and developer from Wilmington, Del. "Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor."

"Clearly, constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry," said NAHB chief economist David Crowe. "The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes."

Derived from a monthly survey that NAHB has been conducting for 25 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 of the major HMI components declined in February. The component gauging current sales conditions fell 11 points to 51, the component gauging sales expectations in the next six months declined six points to 54 and the component measuring buyer traffic dropped nine points to 31.

Looking at three-month moving averages for regional HMI scores, the West was unchanged at 63 in February while the Midwest registered a one-point decline to 57, the South registered a three-point decline to 53, and the Northeast posted a four-point decline to 38.

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