Builders like CalAtlantic Group warned in recent earnings calls that orders weakened in January, raising fears about the crucial spring selling season, especially with the broader market looking shaky: Last fiscal year, the No. 1 builder, D.R. Horton, received 30 percent of its orders for the year between January and March. Industry-wide, an index published by the NAHB and Wells Fargo said builders saw foot traffic at new-home communities fall by five points in January, to a reading of 39 on an index of 100.
But there are reasons to remain optimistic. Wells Fargo noted that job growth has held up relatively well and incomes are rising solidly. U.S. employers added an average of 228,000 jobs per month in 2015, marking the second-strongest pace of growth in 16 years. The breadth of job gains has also improved, across both industries and the nation. Moreover, household finances are also in far better shape, with fairly low debt service ratios and personal income growing solidly.
"While the most recent housing numbers are a bit disappointing, the monthly data tend to be fairly volatile and do not reconcile well with housing demand, which still appears to be strong," the bank's economic team concluded.
Housing sales depend on job gains and consumer confidence, both of which have been strong in recent months, if not as strong as they were in the middle of 2015.
The economy's 4.9 percent unemployment rate is the best since February 2008, but the 151,000 new jobs created in January were well below the fourth-quarter average of 279,000 a month. On Wednesday, the most recent monthly ADP private payroll number totaled 214,000 for February, exceeding estimates. The more closely watched government nonfarm payroll report will be released Friday.
The University of Michigan's consumer confidence index is sitting at 92, well above 2013 levels but below a January 2015 peak of 98.1.