Cold weather keeps builder sentiment under wraps

Unusually bad winter weather across much of the country was at least partly to blame for a four-point decline in the National Association of Home Builders’ Housing Market Index for February, released today. The monthly gauge of single-family builder confidence rested at 65, its lowest level since July 2003’s similar reading.

Each of the HMI’s component indexes declined in February. The index gauging traffic of prospective buyers slipped the most – down 5 points to 46 – followed by the index gauging current sales of new single-family homes, which was down 4 points to 72. The index gauging expected sales in the next six months slid three points to 73.

“The new-homes market is still doing well, thanks to excellent financing conditions, great buyer demographics and improving economic indicators. But many builders reported drop-offs in buyers visiting model homes in early February, and a large percentage attributed those declines to bad weather,” said NAHB President Bobby Rayburn, a home and apartment builder from Jackson, Miss. 

While the HMI is adjusted for normal seasonality, unusually bad weather conditions can have an impact on the final reading, noted NAHB economist Michael Carliner. “Also, NAHB has anticipated a slowdown from the record pace of new-home sales in the final months of 2003, and the latest HMI indicates builder expectations are consistent with that. Still, the outlook for sales conditions remains quite good heading into the spring home-buying season.”

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes as “good,” “fair” or “poor.” They are also asked to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for responses to each component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.

The National Association of Home Builders is a Washington-based trade association representing more than 215,000 members involved in residential and light commercial construction.