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The numbers: For home builders, the good times keep on rolling.
The National Association of Home Builders’ monthly confidence index dropped one point to 74 in February from 75 the month prior, the trade group said Tuesday. That’s just two points below December’s figure, which represented the highest index reading since June 1999.
Index readings above 50 are an indication that confidence is improving, while a figure below that threshold would signal the opposite.
What they’re saying: “While the housing sector has strengthened, inventories continue to be a constraint, even as low mortgage rates should motivate buyers to purchase a home,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “Student loans remain high and present an obstacle in first time buyers’ ability to save for a down payment.”
What happened: The three main indicators that guide the overall index all fell by one point this month.
The index of expectations for future sales over the next six months fell to 79 points, from a revised 80 points. The gauge of current single-family home sales dipped to 80, while the index that measures sentiment regarding prospective buyer traffic dropped to 57.
On a regional basis, builder sentiment improved five points in the Northeast to a reading of 67 and two points in the South to 79. Sentiment declined by five points in the Midwest to 62 and four points in the West to 82.
Big picture: While builders’ confidence may have declined in some parts of the country, nationwide it is elevated when compared to a year ago. In February 2019, the monthly confidence index was at 62, and in some parts of the country it had dropped below 50.
Mortgage rates have hit a three-year low, propping up the country’s housing market. The lower cost of home financing has kept demand among potential buyers elevated.
With few options on the market for buyers looking to lock in a low mortgage rate, more Americans are turning to newly-built homes, which should keep builders’ business booming for some time to come.
Market reaction: D.R. Horton Inc. DHI, -0.02%, Lennar Corp. LEN, -0.33% and Pulte PHM, -0.13% ere all up in morning trading ahead of the data release.
The Dow Jones Industrial Average DJIA, -0.60% and the S&P 500 SPX, -0.39% however both declined in Tuesday morning trading, as blue-chip stocks sank following the three-day weekend.
