NAHB Housing Market Index Rises for Second Month After Twelve Consecutive Monthly Falls

NAHB housing market index rose to 42 in February (consensus 37) from 35 in January 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. Earlier today the weekly MBA Mortgage Applications Index fell 7.7% to follow last week’s 7.4% increase. The Purchase Index was down 5.5% while the Refinance Index fell 12.5%. Inflation, though softer, not far from 40-year highs striking out affordability for many.

United States NAHB Housing Market Index

US NAHB home builder sentiment February 2023

“While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market”.

NAHB Chief Economist Robert Dietz.
  • NAHB HMI 42 vs 37 expected Prior was 35
  • Current single-family home sales 46 vs 40 prior
  • Sales over the next six months 48 vs 37 prior
  • Index of prospective buyers 29 vs 23 prior
  • 31% of builders reduced home prices in February, down from 35% in December and 36% in November.
  • The average price drop in February was 6%, down from 8% in December, and tied with 6% in November.
  • 57% offered some kind of incentive in February, down from 62% in December and 59% in November.

“With the largest monthly increase for builder sentiment since June 2013, excluding the period immediately after the onset of the pandemic, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala.”

Regional HMI Scores

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

  • Northeast rose four points to 37,
  • Midwest rose one point to 33,
  • South rose four points to 40,
  • West posted a three-point gain to 30.

“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” said NAHB Chief Economist Robert Dietz. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”

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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