Homebuilder sentiment has been low since mid-2022. Buyer traffic is dismal.
The NAHB/Wells Fargo Housing Market Index (HMI) has been stuck in a wide range since mid-2022.
Key HMI index Components for February
- Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January.
- Current sales conditions fell four points to 46.
- Sales expectations in the next six months plunged 13 points to 46.
- Traffic of prospective buyers posted a three-point decline to 29.
Builder Incentives
The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024.
The average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.
NAHB Wells Fargo Housing Index vs Traffic
It’s no secret what the problems are.
Mortgage rates are high and so are home prices. Once mortgage rates hit 5 percent traffic plunged.
Builders offered incentives and price reductions but we are at the end of things that can be done. And fewer builders are offering incentives this month.
What About Labor Costs?
It will be interesting to see the impact on construction costs and the price of skilled labor if there are mass deportations.
Deporting skilled labor will be a huge mistake. How many are afraid to show up for work right now?
Neither businesses nor people cheering “deport them all” will like the result if Trump acts foolishly, not only for construction costs but also agriculture, hotel staff, and restaurants.
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Deporting skilled labor would be a serious stagflationary mistake.