Builder confidence stumbled unexpectedly in February as prospective buyer traffic slowed, according to the latest data from the NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI fell 1 point to a reading of 46, a 2.1% decline sequentially, though the index remained 64.3% higher year-over-year. 

The index—on which any reading of 50 or higher indicates a majority of builders see conditions as “good” rather than “poor”—saw mixed results among its three component indices, with the measure of current sales conditions down by 1 point to a reading of 51; the gauge of sales expectations for the next six months up 1 point to a reading of 50; and the measure of prospective buyer traffic down by 4 points to 32. 

“While measures of sentiment are inherently subjective, these results support our view that the rebound has been driven more by supply constraints in prime locations, as opposed to a significant pickup in demand,” wrote David Goldberg, an economist at  UBS Homebuilding, in a statement discussing the numbers. 

Goldberg attributed the disappointment in foot traffic to the rebound being concentrated among move-up buyers, but noted that while numbers were down, traffic quality was high, resulting in better conversion rates. 

“Our channel checks suggest supply constraints are intensifying and demand is improving moderately,” he said. “We still expect [this year’s housing market] to be typified by a slower rate of sales growth but better pricing. This will persist until the recovery spreads into tertiary areas, where supply and demand are more balanced.”

See the NAHB’s full release discussing February’s Housing Market Index reading.

Claire Easley is a senior editor at Builder.