- National Association of Homebuilders/Wells Fargo Housing Market Index drops 42 points regarding single-family homes to reading of 30 in month of April
- This one month drop is largest in Index’s 35-year history
- Any Index reading above 50 considered positive…reading of 30 is definitely NOT positive
Conducted from April 1 – April 13, 2020 when stay-at-home orders, business closures, layoffs and furloughs were issued in efforts to mitigate the coronavirus spread, the National Association of Homebuilders/Wells Fargo Housing Market Index dropped from March’s 72 rating to 30 in April. This HMI 42-point drop was the largest ever one-month drop in single-family home confidence levels in the HMI’s 35-year history.
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“This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities,” said NAHB Chair Dean Mon, and builder and developer from New Jersey.
This HMI measures three components of the single-family home market:
- Current sales conditions dropped to 36 points from 79
- Six-month sales expectations dropped 39 points to 36 points
- Buyer traffic points dropped from 56 points to 13.
Regionally, homebuilder sentiment looked like this in April:
- Sentiment in the Northeast dropped 45 points to 19.
- Midwest builder sentiment dropped to 25 from 42 the month before.
- In the South, homebuilder sentiment fell 42 points to 34.
- Sentiment in the West dropped 47 points to 32.
“To show how hard and fast this outbreak has hit the housing sector, a recent poll of our members reveals that 96% reported that virus mitigation efforts were hurting buyer traffic, “ said NAHB’s chief economist Robert Dietz. “While the virus is severely disrupting residential construction and the overall economy, the need and demand for housing remains acute.”
Just weeks before April, new home sales in March hit the highest level since 2007, according to the US Census, despite an acute housing shortage coming into 2020. The rate of homebuilding continued to be well below normal levels as was the number of existing or resale homes listed on the market during Q1 2020 but these low inventory levels for both newly constructed and existing homes may be a huge plus for buyers and sellers once the economy begins to function on some level again.
Dietz said, “…we expect that housing will play its traditional role of helping to lead the economy out of a recession later in 2020,” as people always need a place to live.
Thanks to CNBC’s Diana Olick.
Also read: NAR’s & Better Homes & Gardens Coronavirus Guidelines for Agents, NAR’s & Better Homes & Gardens Coronavirus Guidelines for Agents, Podcast: Good News For Housing And Economy? | Top 5 Headlines Worth Celebrating