The COVID-19 outbreak struck a major blow to builder
confidence in April. The prospect of widespread shutdowns of businesses and
prolonged shelter at home orders sent the National Association of Home
Builders/Wells Fargo Housing Market Index (HMI) spiraling down 42 points, its
largest monthly change in a more than 30 year history, to a reading of 30. The
index, a measure of home builder confidence in the market for new homes,
recovered slightly in May, rising 7 points.
This morning NAHB said, in a sign that housing stands
poised to lead a post-pandemic economic recovery, its index soared 21 points to
58, now only 14 points below where it finished in March. Any reading above 50
indicates a positive market.
NAHB’s leadership is clearly upbeat. Chairman Dean Mon said, “As the nation
reopens, housing is well-positioned to lead the economy forward. Inventory is
tight, mortgage applications are increasing, interest rates are low and
confidence is rising. And buyer traffic more than doubled in one month even as
builders report growing online and phone inquiries stemming from the outbreak.”
Analysts polled by Econoday had expected a much slower return of optimism
in the sector. The consensus was for another 7-point increase in June, to 44.
The highest estimate was only 50.
The index is derived from a monthly survey of NAHB new home builder members
in which they are asked to give their 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.”
All the HMI indices posted gains in June. The HMI index gauging current
sales conditions jumped 21 points to 63, the component measuring sales
expectations in the next six months surged 22 points to 68 and the measure
charting traffic of prospective buyers vaulted 22 points to 43.
Looking at the monthly average regional HMI scores, the Northeast surged 31
point to 48, the South jumped 20 points to 62, the Midwest posted a 19-point
gain to 51 and the West catapulted 22 points to 66.
“Housing clearly shows signs of momentum as challenges and opportunities
exist in the single-family market,” said NAHB Chief Economist Robert Dietz. “Builders
report increasing demand for families seeking single-family homes in inner and
outer suburbs that feature lower density neighborhoods. At the same time,
elevated unemployment and the risk of new, local virus outbreaks remain a risk
to the housing market.”