Washington, DC, Mar. 17—Fears of a possible war in Iraq, weakness in the national economy and job market, and worse than normal weather conditions took a toll on home builders' confidence in early March, according to the National Association of Home Builders (NAHB). NAHB's Housing Market Index (HMI), a monthly gauge of builder sentiment, fell ten points from its February reading to 52 this month, the lowest level since November 2001.
"Even as the lowest mortgage rates in decades continue to support new home sales, builders are understandably concerned about continued economic weakness, the situation in Iraq, and the anticipated effects of these developments on consumer behavior," said Kent Conine, NAHB president and a home and apartment builder from Dallas.
Conine noted that the HMI dipped to 47 immediately following the terrorist attacks on America in September 2001, and that builder confidence steadily rebounded in the following months.
The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Homebuilders are asked to rate current sales of single family homes and sales expectations for the next six months as good, fair or poor. They are also asked to rate traffic of prospective buyers as either high to very high, average or low to very low. Scores for responses to each component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.
All three of the HMI's component indexes retreated in March following a solid showing in February. The index gauging current sales of new single family homes fell ten points to 59, while the index for expected sales in the next six months fell nine points to 57 and the index gauging traffic of prospective buyers fell eight points to 35.
"Builder confidence took a substantial hit this month, but there is certainly no sense of panic among single family builders, particularly in view of the support being provided by falling mortgage rates and still healthy appreciation of house values. It's more a sense of needing to be cautious heading forward," said NAHB chief economist David Seiders.
"Right now, builders are reacting to the potential for consumers to postpone anticipated new home purchases. However, inventories of unsold new homes are still quite lean, so builder sentiment should rebound quickly in the months ahead as the geopolitical and economic uncertainties are resolved."
