NAHB Housing Market Index Rises for Fourth Month with a Lack of Resale Inventory

NAHB housing market index rose to 45 in April (consensus 44) from 44 in March and gave the highest reading since September. December was the lowest level since mid-2012 with the exception of the spring of 2020.  Builder sentiment had declined every month in 2022. Inflation, though softer, is still striking out affordability for many. However, confidence is rising with a lack of resale inventory despite elevated interest rates. Location is critical, Redfin reported last week that U.S. rents saw the first annual slump since the pandemic hit in March 2020.

United States NAHB Housing Market Index

US NAHB home builder sentiment April 2023

“For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates,” said NAHB Chairman Alicia Huey.”

  • NAHB HMI 45 vs 44 expected Prior was 44
  • Current single-family home sales 51 versus 49 prior
  • Sales over the next six months 50 versus 47 prior
  • Index of prospective buyers 31 versus 31 prior

“Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing.  Nonetheless the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala.”

Share of builders reducing home prices continues trending down:

  • 30% said they reduced prices in April, compared to 31% in March and February, 35% in December and 36% in November.
  • The average price reduction in April was 6%, the same as in February and March but lower than in December (8%).
  • The share of builders using incentives to bolster sales has edged up from 57% in February, to 58% in March to now 59% in April, but it’s still lower than it was last December (62%).

Regional HMI Scores

Looking at the three-month moving averages for regional HMI scores,

  • Northeast rose four points to 46,
  • Midwest rose two points to 37,
  • South rose four points to 49,
  • West posted a four-point gain to 38.

“Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%,” said NAHB Chief Economist Robert Dietz. “More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023. And while AD&C loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse.”

Home Builder Earnings Reports:

About National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)

Based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI 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.

Source: NAHB

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