Homebuilder Confidence Remains on Strong Footing

• The NAHB Housing Market Index showed a slight decline in homebuilder confidence in March
• Responders saw declining current sale conditions, better future sale conditions and better steady buyers’ traffic
• Homebuilder confidence remains on strong footing; residential housing will remain strong in 2021

The National Association of Home Builders Housing Market Index decreased slightly to 82 in March from 84 in February. The NAHB Index remains very strong, well above the 50-point threshold. The NAHB Housing Market Index gauges builder sentiment among builders of single-family homes; a reading of above 50 indicates that more single-family homebuilders view conditions as positive while a reading of below 50 indicates that more single-family home builders view conditions as negative.

Details of the report were mixed. The current sales conditions component which makes up 60% of the NAHB HMI decreased to 87, the lowest level since August, from 90 in February; the future (next six months) sales conditions component rose to 83 from 80 in February and the prospective buyers traffic component stayed steady at 72.

Homebuilder confidence remains on strong footing and has been well above the 50-point threshold since July. Homebuilding was strong heading into the pandemic, and demand fundamentals have improved since then. Extremely strong demand for more space during the pandemic and the home renovation boom have put upward pressure on prices of homebuilding materials, particularly softwood lumber. PNC expects residential housing demand to remain strong this year, but house price growth will likely be weaker than last year. Mortgage rates are likely to increase this year, reducing affordability and tight housing inventories will loosen as the vaccine rollout continues and sellers feel more comfortable listing their homes.

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