The National Association of Home Builders (NAHB) released its NAHB/Wells Fargo Housing Market Index for March on Monday.
The HMI measures builder confidence in the market for newly constructed single family homes.
A reading of 50 for the NAHB Housing Market Index (HMI) indicates that more builders are confident of housing market conditions for new single family homes than those who are not confident.
Home builder confidence fell for the third consecutive month with a two-point drop to a reading of 44 in March.
Several Factors Create New Home Bottleneck
An NAHB leader noted that several situations are causing a “bottleneck” in the supply of new homes as compared to those wanting to buy them:
- Low supply of developed lots available for new construction
- Rising costs for labor and materials
- Stricter mortgage credit requirements for homebuyers and lowball home appraisals. (These circumstances are typically caused by some mortgage lenders taking a conservative attitude toward risk management by tightening credit requirements and appraisers erring on the side of caution when valuing single family homes.)
Would-be buyers may find themselves stuck between a lack of buildable lots and ready building supply chains and lenders reluctant to risk mortgage defaults caused by lenient loan approvals.
Keep in mind that this only one perspective; if you’re looking for a new home, don’t give up.
Future Sales Confidence Creates Bright Spot
The HMI also measures builder confidence in three categories including current sales conditions, sales conditions within the next six months and the amount of foot traffic in new housing developments.
Confidence in current sales conditions dropped from 51 points in February to 47 points in March, but the news is not all bad.
Confidence in sale conditions for the next six months rose by one point from 50 to 51, and builder confidence in buyer foot traffic rose by three points to 35.
Foot traffic will likely increase as warmer weather arrives and the peak home buying season gains momentum.
Housing Market Conditions Vary By Region And Community
The three-month rolling average of builder confidence in four geographic regions of the U.S. showed mixed results for March.
The index reading for the Northeast had no change and remained at 39.
Index readings for the Midwest and Southeast declined by one point each to 47 and 46 respectively.
The March index reading for the West came in gaining four points to 58.
If you’re ready to buy a home, check with a licensed real estate professional specializing in the area where you want to buy.
This is the best way to gain specific information on the Chicago area’s market conditions and home prices.