Better traffic in February improves builder sentiments

According to the monthly NAHB/Wells Fargo Housing Market Index, things are looking up for the nation's builders, albeit only very slightly. The main reason for the improved outlook is increasing traffic at new home communities, which typically rise sharply each year following the Super Bowl. Still, many of those traipsing through model homes may be looking for decorating ideas rather than seriously looking at new homes, but the trend certainly bears watching:

Builder confidence in the market for new single-family homes edged marginally higher in February as traffic of prospective buyers through model homes improved considerably, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI rose a single point to 20 this month, still close to its recent historic low reading of 18 (the series began in January of 1985).

“While builders remain very cautious about the outlook for new-home sales given today’s economic environment, the fact that more consumers appear to be checking out their options is a good sign,” said Sandy Dunn, a home builder from Point Pleasant, W.Va. and the newly elected 2008 president of the National Association of Home Builders (NAHB)...

“Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase given improving affordability factors and the large selection of units on the market,” said NAHB Chief Economist David Seiders. “That said, builders know there’s a difference between people looking and people buying, and their current outlook remains quite subdued. Additional stimulative measures on the legislative and policy side are definitely needed to bolster consumer confidence and help bring about a housing and economic recovery.”...

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor...

Three out of four regions posted HMI gains for the month, including a three-point gain to 24 in the Northeast, a two-point gain to 24 in the South and a 2-point gain to 15 in the West. The Midwest registered no change for the month at 16.

Even with the uptick, however, the overall sentiment remains the lowest it's been since January of 1991 (historical table below):

The NAHB/Wells Fargo Housing Market Index (Historical Data)

Housing Market Index (Historical data) (Seasonally Adjusted)
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
1985	50	58	54	49	51	54	58	58	56	59	58	57
1986	57	55	57	62	64	65	59	55	57	64	59	64
1987	63	60	60	59	55	56	55	54	52	50	56	51
1988	53	51	51	52	54	49	54	56	53	49	58	60
1989	54	53	48	44	44	45	46	50	51	48	46	43
1990	42	44	40	39	36	36	32	30	31	28	25	22
1991	20	27	36	41	40	42	41	36	37	37	37	35
1992	44	49	46	46	47	45	46	49	48	50	54	56
1993	55	52	53	52	51	53	57	60	62	66	71	71
1994	70	64	61	61	59	57	53	53	50	49	50	43
1995	40	42	40	42	43	45	49	50	51	55	52	53
1996	54	49	59	60	61	59	58	56	55	56	54	55
1997	54	52	57	56	55	56	55	58	59	59	58	60
1998	60	65	66	67	67	70	71	72	71	73	77	78
1999	75	71	71	71	75	77	75	72	72	69	70	70
2000	69	68	64	63	63	58	59	60	60	62	63	57
2001	52	58	60	59	58	59	57	59	55	46	48	55
2002	58	58	62	61	61	61	61	55	63	61	62	63
2003	62	63	56	55	60	63	65	67	67	69	68	69
2004	68	66	66	69	69	68	67	70	67	69	70	71
2005	70	69	70	67	70	72	70	67	65	68	61	57
2006	57	56	54	51	46	42	39	33	30	31	33	33
2007	35	39	36	33	30	28	24	22	20	19	19	18
2008	19	20

Source: Builders' Economic Council (BEC) Monthly Surveys