Builder Confidence Up a Third Straight Month, But Measured Pre-Bank Crisis

Little by little, but for a third consecutive month, the National Association of Home Builders /Wells Fargo Housing Market Index measuring developer optimism crept higher in March.

The index measures newly built single-family homes. It moved two points higher to 44.

Builders expressed that a lack of existing inventory is shifting demand to the new home market.

Call it “cautious optimism” despite high construction costs and elevated interest rates, which continue to hamper housing affordability, according to the report.

NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala., said in prepared remarks, that “even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions, they continue to report strong pent-up demand as buyers are waiting for interest rates to drop and turning more to the new home market due to a shortage of existing inventory.”

Banking Issues Bring Instability

Huey added that instability lies ahead in the near- and medium-term given concerns in the banking system and volatility in interest rates.

NAHB Chief Economist Robert Dietz said in prepared remarks, “while financial system stress has recently reduced long-term interest rates, which will help housing demand in the coming weeks, the cost and availability of housing inventory remains a critical constraint for prospective home buyers.

Some 40% of builders in the survey currently cite lot availability as poor.

The HMI index gauging current sales conditions in March rose two points to 49 and the gauge measuring traffic of prospective buyers increased three points to 31. This marks the strongest traffic reading since September of last year. The component charting sales expectations in the next six months fell one point to 47.