While confidence among homebuilders remains overall negative, there was a slight uptick in positivity in March as some market conditions observed slight improvement, according to the latest data from the National Association of Home Builders (NAHB). However, the future ahead remains unclear.
The NAHB/Wells Fargo Housing Market Index (HMI) for March saw builder confidence rise one point to 38, following a revised one-point rise in February (originally a one-point fall to 36). With March’s reading, builder confidence remains in the negative territory (below the 50 point breakeven mark) as it has for the past almost two years.
Notably, responses to NAHB’s March survey were received after the conflict with Iran started.
NAHB Chief Economist Robert Dietz said that while improvement in mortgage rates contributed to the small rise in confidence, “downpayment hurdles and uncertainty from the conflict with Iran and the price of oil will be headwinds going forward.”
All three of the major HMI indices posted gains in March. The HMI index gauging current sales conditions increased one point to 42, the index measuring future sales grew two points to 49 and the index charting traffic of prospective buyers grew three points to 25.
Regionally (looking at the three-month moving averages), the Northeast held steady at 44, the Midwest was unchanged at 43, the South held constant at 35 and the West fell two points to 31.
NAHB Chairman Bill Owens noted that affordability “remains a top concern” for both builders and buyers.
“Many buyers remain on the fence waiting for lower interest rates and due to economic uncertainty,” he continued. “Builders are facing elevated land, labor and construction costs and nearly two-thirds continue to offer sales incentives in a bid to firm up the market.”
Builders have continued to offer incentives to combat the wave of challenges mentioned. The HMI found that 37% of builders cut prices in March, up slightly from 36% in February. The average price reduction remained stable at 6%. The use of sales incentives was 64% in March, down one percentage point from February, and marking the 12th consecutive month this share has exceeded 60%.
Looking ahead, Dietz said that the “administration’s executive orders issued last week to reduce regulatory burdens associated with homebuilding are a positive step toward increasing attainable housing supply.”
Additionally, the Senate passed the 21st Century ROAD to Housing Act, which in working to address the housing crisis proposes some reductions to environmental reviews on certain projects as well as other stipulations to assist the housing construction industry.
