Poor Weather Conditions Negatively Impacted Home Builder Sentiment in February

By February 18, 2014Economy

The National Association of Home Builders (NAHB) and Wells Fargo said that its Housing Market Index (HMI) dropped sharply from 56 in January to 46 in February. As we have seen in other recent economic indicators, poor weather conditions negatively impacted foot traffic for would-be home buyers and overall construction activity. Aside from the weather, the NAHB also attributed the decline in home builder confidence to supply and labor issues.

The significance of the monthly decrease was that the HMI fell below 50 for the first time since May 2013. Note that values under 50 suggest that more home builders were negative in their outlook than were positive, and as such, this data ended eight straight months of generally rebounding sentiment in the housing market. To the extent that weather was the main contributor, however, we would expect the HMI to rise again in upcoming reports.

Still, there were drops in home builder activity noted in all four regions around the country, with the weakest sentiment noted in the Northeast. In addition, the indices for current (down from 62 to 51) and expected single-family home sales over the next six months (down from 60 to 54) were also down significantly.

Tomorrow, we will get new housing starts and permits for January, with weather impacts also anticipated to reduce new residential construction activity for the month. The consensus expectation is for housing starts to drop from an annualized 999,000 in December to roughly 950,000 in January.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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