Home Builders’ Confidence Takes Biggest Monthly Dive Ever

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Sam Hodgson | Bloomberg | Getty Images

A crucial indicator of homebuilders’ sentiment has just suffered its largest monthly decline in the index’s 35-year history as the coronavirus pandemic hit the US economy.

Builders’ confidence in the single-family home market plunged 42 points on a reading of 30 in April, the lowest point since June 2012, according to the latest housing market index from the National Association of Homebuilders / Wells Fargo. The investigation dates from January 1985.

The GUI reading should drop to 55. Anything above 50 is considered positive. The last negative reading took place in June 2014.

This month’s investigation was conducted from April 1 to April 13, after millions of Americans were ordered to stay at home to stem the spread of the virus, causing historic waves of business closings, layoffs and leaves.

“This unprecedented drop in builders’ confidence is due exclusively to the coronavirus epidemic across the country, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities,” said said NAHB President Dean Mon, a builder and developer from Shrewsbury, New Jersey.

Of the three components of the index, current sales conditions have dropped 43 points to 36, sales forecasts for the next six months have dropped 39 points to 36 and buyer traffic has decreased 43 points to 13.

Housing construction strengthened considerably in 2020. According to the US Census, new home sales in March reached their highest level since 2007, when the subprime mortgage crisis began to take hold. Construction was considered a critical activity by the federal government during the coronavirus pandemic, although some states – such as New York, Pennsylvania, New Jersey, Washington, Michigan and Vermont – have closed most of their operations.

“To show how hard and fast this epidemic has hit the housing industry, a recent member survey found that 96% reported that virus mitigation efforts were hurting buyer traffic,” said Robert Dietz, NAHB chief economist. “While the virus severely disrupts residential construction and the economy as a whole, the need for and demand for housing remains acute. “

Before the current decline in housing demand, there had been a severe housing shortage this year. Housing construction, while improving, was still well below historically normal levels and the number of existing homes for sale was at an historic low. This could bode well for the industry once the economy recovers.

“As social distancing and other mitigation efforts show signs of alleviating this health crisis, we expect housing to play its traditional role in helping to get the economy out of a recession more late in 2020, “said Dietz.

Regarding the feeling of builders at the regional level, the HMI in the Northeast fell by 45 points to 19. In the Midwest, it fell by 42 points to 25, in the South, it fell from 42 points to 34, and in the West it dropped 47 points to 32.

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