Homebuilder Sentiment Falls To 46, Missing Expectations


Photo: Justin Sullivan/Getty Images

The NAHB housing market index for February fell to 46 in February, from 47 the previous month.After rising for eight straight months, the index held steady in January but declined for the month.

But the index continues to stay near its highest level since May 2006.

Builders are adjusting their expectations to reflect the pace of new home sales, according to chief NAHB economist David Crowe.

Sentiment has flatlined because of concerns over access to credit and uncertainties about job growth:

“Following solid gains over the past year, builder confidence has essentially leveled out and held in the same three-point range over the last four months,” noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.

“This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit, but it’s also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labour and lots as demand for new homes strengthens.”

Investors are watching this number, because one of the big concerns about the housing market is that new home supply is adding to inventory, even as new home sales have been disappointing.

Bank of America’s Michelle Meyer has however said that concerns of overbuilding are overblown.

The National Association of Home Builders’ housing market index is a sentiment index in which respondents rate not just the housing market but also the economy in general.

The index draws on builder perceptions of current single-family home sales and sales expectations for the next six months. It also includes builders’ expectations of traffic of prospective buyers. A reading of 50 shows that an equal number of builders view the market as good or bad.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.