Real Estate Big Data

The NAHB Index’s newest numbers have some people on edge

nahb index

(REAL ESTATE NEWS) The NAHB housing market index is reflecting a drop in home builder confidence which is not to be confused with another crucial home builder trait.

The NAHB index

On Monday, The National Association of Home Builders released new data showing a drop in confidence among American home builders this month.

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The NAHB housing market index also fell by three points in April, to 68. In March, the NAHB index made it up to 71, which is the strongest reading in over a decade.

Incorrect

The NAHB index is based upon a survey of NAHB members, conducted monthly, which targets the single-family housing market, in particular. The survey asks for a rating of market conditions for new home sales, both in the present and in the next six months. It also asks for information about the behavior and numbers of potential new home buyers.

According to a poll conducted by Thomson Reuters, economists were incorrectly optimistic.

They expected home builder confidence to reach 70 this month, after the boost in March attributed to President Trump’s perceived anti-regulatory stance in the housing industry.

Apples to oranges

Chief economist of the National Association of Home Builders, Robert Dietz, accompanied the new report with a reminder to distinguish demand from confidence: “The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” he said, but “builders are facing several challenges.” According to Dietz, these include “hefty regulatory costs and ongoing increases in building material prices.”

NAHB Chairman Granger MacDonald had some reassuring words of his own to add.

“Even with this month’s modest drop, builder confidence is on very firm ground,” he said. “Builders are reporting strong interest among potential home buyers.” Basically, no one is worried about demand at this point. The problem lies in all the obstacles separating demand from supply.

No need to panic

Each of the index’s three components saw decreases in April: the current sales conditions component fell to 74, down 3 points; the sales expectations for the next six months also dropped three points, to 75; and the buyer traffic component fell a single point, to 52. However, the NAHB maintains that all three components remain at healthy levels.

The regional breakdown reveals a disparity between the West and the rest of the country.

Builder sentiment remained unchanged from March in the West, and went down a single point in the South. In the Northeast, however, builder sentiment went down an alarming eight points, and the Midwest saw a five-point decrease.

I dip, you dip, we dip

On the 18th, the Commerce Department is slated to release a report, unrelated to the NAHB, detailing new residential construction from March. New housing starts are expected to have declined to an annual rate of 1.262 million, after a jump to 1.288 million the previous month.

The industry may be starting to worry that President Trump will not keep his deregulation promises. If that’s the case, further dips may be in store as confidence drops across the board.

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