Builder Confidence Slips but Remains High in February

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index SLIPPED one point in February to a still-high 74 (out of 100);
  • Each of the components of the HMI FELL one point;
  • Regionally, the index IMPROVED in two of the four census regions, slipping five points in the Midwest and four in the West while increasing five points in the Northeast and two in the South.


  • The total HMI fell for two straight months for the first time since the end of 2018;
  • All three components fell month-month for the first time since last June;
  • The current sales measure has declined in three of the last four months.

Data Source: National Association of Home Builders (NAHB)

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Despite continued low-interest rates, the National Association of Home Builders’ Housing Market Index slipped for the second straight month in February but remained at a solid 74 (out of 100).

The index has been above the “break-even” point of 50 for 64 months – since June 2014.

Even though builder confidence has improved, sales of new single-family homes have declined for three straight months and the inventory of new homes for sale remains low. The number of new homes for sales during 2019 averaged 331,000 per month. In the last pre-recession year, 2007, the number of new homes for sale averaged 531,000 per month.

Similarly, builders are adjusting to a new normal in new single-family construction. In 2019, the seasonally adjusted annual rate of single-family starts averaged 894,000 per month down 13.7 percent from 1,036 in 2007.

Builder confidence rose to its highest level in 20 years in early December (based on sentiment at the end of November) as the outlook for current sales, for sales six months forward and buyer traffic all rose.

The increase in confidence has come despite relatively weak new home sales. In the ten years since the end of the Great Recession, new home sales have averaged about 483,000 per month. In the same time span before the Recession began, new home sales averaged 992,000 per month.

The explanation appears to be the Recession itself which discouraged younger families from homownership, reducing construction of new homes. In addition to supply-and-demand mechanics, younger would-be homeowners have redefined the American Dream from a home with a backyard to apartment-style multi-family living closer to jobs and a reduced demand on resources.

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