While numbers are still near historical lows, builder confidence in the single-family new-housing market held steady in March, according to the National Association of Home Builders/Wells Fargo Housing Marketing Index (HMI).
The index, which was released on Monday, remained at 20 for the second month in a row. It sank to an all-time low of 18 in December 2007 and edged up a point in January.
Derived from a national survey conducted monthly by the NAHB since 1985, the HMI measures builders' perception of current single-family home sales and sales expectations for the next six months, rated as "good," "fair," or "poor." The survey also measures traffic of prospective buyers as "high to very high," "average," or "low to very low." The scores from each component are used to calculate a seasonally adjusted index. Any number over 50 indicates that more builders view sales as good rather than poor.
The numbers remained stable for the second month in two of the three components, current sales and traffic. The current sales index of 20 reflected a number not seen since September 2007; at 19, the traffic index was at its highest point since July 2007. The third component, sales expectations for the next six months, dropped one point from 27 to 26.
The spread between current sales and sales expectations for the next six months fell from 35 percent in February to 30 percent in March. The investor community tracks the number for indications of builders being more positive or negative about the outlook for the future as compared to current conditions.
The falling spread suggestions that builder expectations continue to drop, according to Carl Reichardt, senior analyst for home building and building products at Wachovia Capital Markets. The traffic component, which had seen a nice uptick between January and February (from 14 to 19) and then evened out, suggests that prospective shoppers were responding to particularly aggressive incentives and were on the hunt for deals. That traffic has yet to translate into signed contracts, in part because of tightened lending standards, Reichardt noted.
The numbers reflect the continuingly difficult market for new-home sales, especially in light of the on-going credit crunch.
"Our surveys confirm what I've been hearing personally from builders across the country, which is that interested buyers are out there, but they are either reluctant to go ahead with a home purchase or they are unable to find mortgage financing they can afford," Sandy Dunn, NAHB president and a home builder from Point Pleasant, W. Va., said in a statement.
The NAHB applauded the efforts of the federal government to address the crisis in the financial markets and to stimulate the economy, and urged even more aggressive efforts, with the next round directed "squarely at the housing sector," NAHB chief economist David Seiders said in a statement.
"A temporary home buyer tax credit, FHA modernization, and GSE oversight reform are the three most important things that Congress can accomplish right now to help ensure that housing does not drag the economy into a full-blown recession," Seiders said. "Provided that the necessary actions are taken promptly, a housing market recovery most likely would take shape by the second half of this year."
To view the HMI data, click here.