Home Builder Sentiment Declines for Fourth Consecutive Month in March

On Wednesday (3-16-22), The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes edged 2-points lower in March to a reading of 79. Despite four consecutive monthly declines, the HMI has posted solid reading for the past 6-months.

Any reading above 50 indicates that more builders view conditions as good rather than poor and that demand remains strong.

The NAHB notes that while builders continue to report solid buyer traffic numbers, helped by historically low existing home inventory and a persistent housing deficit, increasing development and construction costs have taken a toll on builder confidence. As a result, the March HMI recorded its lowest future sales expectations in the survey since June 2020.

Builders are reporting growing concerns that increasing construction costs and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market. While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell seven points to 69, the Midwest dropped one point to 72, and the South fell three points to 83. The West moved up one point to 90.