The NAHB housing market, a gauge of homebuilder confidence, tumbled to 46 in February. This was the biggest fall on record and the lowest reading since May 2013.
Economists polled by Bloomberg were looking for homebuilder confidence to hold steady at 56. A reading over 50 shows that more builders view conditions as good than poor.
“Unusually severe weather conditions,” and “continued concerns over the cost and availability of labour and lots” were blamed for the slump in homebuilder confidence.
“Clearly, constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry,” NAHB chief economist David Crowe said in a press release. “The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes.”
All three HMI components fell in February.
- The component gauging current sales conditions fell 11 points to 51.
- The component gauging sales expectations in the next six months declined six points to 54.
- The component measuring buyer traffic dropped nine points to 31.
“A report like this has been overdue, though it was impossible to know when it would come,” Ian Shepherdson at Pantheon Macroeconomics wrote in a note to clients. “And the headline index still looks high relative to the recent new home sales data”
He did however say that he doesn’t think people have “abandoned” their plans to buy homes but have “merely deferred,” their plans. “But things could get worse before they get better.”
The weather has been wreaking havoc on economic data.
Homebuilder sentiment has been decoupling from housing starts. But low inventory levels and rising demand should push housing starts higher in 2014.
Economists expect the housing market to cool this year after home prices went on a tear in 2013. The impact of rising mortgage rates and the Fed’s move to taper its monthly asset purchase program are expected to weigh on housing.
Homebuilder stocks are also taking a beating on the report.
Here’s a chart from Sheperdson that shows the decline in homebuilder confidence and its trajectory in relation to new home sales: