There might have been anecdotal evidence that traffic of prospective new home buyers was picking up during the past several weeks, but such evidence did not surface in the March Housing Market Index of builder confidence from the National Association of Home Builders and Wells Fargo.
The HMI remained stuck at 9 in March, even with February and only a point higher than the historic low set in January, the NAHB reported Monday. Moreover, the three component indices were all either flat or down.
The index gauging current sales conditions held even with February at 7, and the index gauging sales expectations in the next six months remained stuck at a record-low of 15. Meanwhile, the index gauging traffic of prospective buyers declined two points to 9 in March despite numerous reports from large builders that traffic has seemed to be increasing since January.
"Since the traffic subcomponent failed to show sustained improvement over February and instead revealed a decline, I am starting to believe that the HMI survey is weighted too heavily towards reflecting the sentiment of smaller builders," said Jonathan Smoke, senior vp/products and innovation for Hanley Wood Market Intelligence, who is currently preparing an analysis of the methodology of the HMI in light of the increased market share of production home builders in recent years. "Anecdotally, we are hearing about improved traffic at big builders from promotions and marketing of the Home Buyer Tax Credit."
Regionally, the West, South and Midwest remained stuck at February's readings of 5, 12 and 8, respectively. The Northeast ticked up one point to 9 from its record low of 8 last month.
"The economy continues to be the main drag on home sales activity right now, in terms of consumer confidence across most of the country," said David Crowe, NAHB's chief economist. "What's more, home builders report that tight credit conditions are posing a further hurdle, especially for potential first-time buyers, while potential trade-up buyers are finding it very tough to sell their existing homes so they can make a move."
"Builders find potential buyers are reluctant because of uncertainty about their future job security and the overall economic outlook." added NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.