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First Cut: March NAHB Housing Market Index off recent peaks, but still high

The NAHB/Wells Fargo Housing Market Index dipped to 72 in March after 74 in February but remains at a level consistent with high levels of optimism for homebuilders. The decline in early March may be a signal that conditions have softened a bit for building and purchase of new homes, but with 30-year fixed rate for mortgages just above historic lows, consumers are likely to stay in the market where they can.

The component for sales of single-family homes dipped 2 points to 79, still within sight of the series high. The component for expected sales of single family homes was probably the most affected by the concerns about the impacts of COVID-19 on the economy and fell to 75 in March after 79 in February and was the lowest since 71 in August 2019. So far buyer traffic is still elevated with that component slipping only a single point to 56 in March.

The housing market is likely to take a hit as consumers face greater employment insecurity and worries about making up lost income if their job is cut back or layoffs occur. However, the situation is likely to be temporary. If so, April could well see a modest bounce back as consumer lock in low rates and act before prices start to move higher with limited housing stock.

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