COVID-19 continues to rattle builder confidence

by Candyd Mendoza17 Apr 2020

With no signs of the coronavirus crisis easing up soon, builder confidence in the market for newly-built single-family homes fell into negative territory in April.

The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which gauges builders' perceptions on the housing market, nosedived 42 points in April to 30.

The drastic decline marked the first time the index went below 50 points since 2014, indicating that more builders viewed conditions as poor. This was also the biggest single monthly change in the history of the index and the lowest builder confidence reading since 2012.

“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 Chairman Dean Mon.

However, Mon pointed out that homebuilding is still considered an essential business nationwide during the pandemic. He remained positive that buyers would likely return to the marketplace as the outbreak abates.

Among the index components, current sales conditions plunged 43 points to 36, while sales expectations in the next six months went down 39 points to 36, and the part measuring the traffic of prospective buyers plummeted 43 points to 13.

Regionally, monthly HMI scores in the Northeast were down 45 points in April to 19. The Midwest (down 42 points to 25), the South (42 points to 34), and the West (47 points to 32) all posted month-over-month declines as well.

“Before the pandemic hit, the housing market was showing signs of strength with January and February new home sales at their highest pace since the Great Recession,” said NAHB Chief Economist Robert Dietz. “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. While the virus is severely disrupting residential construction and the overall economy, the need and demand for housing acute. As social distancing and other mitigation efforts show signs of easing this health crisis, we expect that housing will play its traditional role of helping to lead the economy out of a recession later in 2020.”