The current uncertain economic conditions have impacted home builders’ confidence. NAHB/Wells Fargo Housing Market Index dropped 2 points to 72 in March 2020. Despite the decline, NAHB Chairman Dean Mon stated sentiment remains strong as low mortgage rates are anticipated to raise demand in the housing market with limited offers for home buyers.
For determining March’s HMI, half of the responses of home builders were received prior to March 4. 21 % of home builders who participated in the survey before March 4 report some disruption in supply due to coronavirus in other countries such as China. 33 % amongst home builders who answered the survey after March 6 indicated that this is an emerging issue.
The impact of the Coronavirus and current stock market declines are expected to reflect more in the following month’s report for NAHB/Wells Fargo Housing Market Index.
NAHB/Wells Fargo Housing Market Index is derived from monthly surveys that the National Association of Home Builders (NAHB) has been conducting since 1985. It indices single-family home sales and sales forecasts for the subsequent six months according to builder perceptions.
Survey participants are asked to evaluate present market conditions for new home sales and the next six months on a scale of “good”, “fair”, “poor” and “high to very high”, “average” or “low to very low” the traffic of prospective home buyers. Afterward, scores for each segment are used to determine the monthly HMI index.
HMI is a diffusion index and its reading ranges between 0 and 100. That means that a monthly index above 50 indicates a favorable and below 50 indicates a negative outlook on home sales.