As if we really needed a reminder that today’s housing market is still very fragile, the first installment in a slew of housing data to be released this week came in below expectations.
Home builder sentiment, as measured by the National Association of Home Builders’ monthly sentiment survey, was unchanged in March, and February’s reading was revised down.
This after five straight months of gains in builder confidence.
“Many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets, said NAHB chief economist David Crowe in a release.
Most troubling was a big drop in sentiment out West, which is where the bulk of the nation’s foreclosures and distressed properties are. Banks are really ramping up the foreclosure process now that the so-called “Robo-signing” settlement is behind them and new guidelines are in place. That means more foreclosed properties will be hitting the housing market, as the still-swelled pipeline finally begins to empty.
While the all-important South region, most meaningful for the builders, saw an increase in sentiment, it is still below the national average, and overall current sales were down and buyer traffic was flat. Only sales expectations over the next six months rose. That could have a lot to do with unseasonably warm weather.
With temperatures in most of the country hitting near record highs in January and February, it begs the question, did much of the Spring market start early, and did it steal from the historically strong months of March and April?
“We think it has pulled forward a useful amount,” says analyst Stephen East of ISI Group. “It definitely helps breaking ground and has been a big help on the jobs front.”
In fact ISI studied weather in all four regions and reported that while favorable economic trends and specifically job growth are the primary driver of renewed housing activity, “We believe some demand was pulled forward from the later Spring months, implying the first quarter could be above investor expectations, while the second quarter could be below expectations.”
Weather cannot be discounted in home sales, especially sales of new construction, since builders can offer potentially faster turnarounds for new orders if they’re not hampered by frozen earth. February saw a big spike in the “current sales” component of the home builder sentiment index. Buyer traffic in March was unchanged.