Homebuilder sentiment falls, as coronavirus begins to factor in

Workers carry a wall frame for a home under construction at a K. Hovnanian Homes development in Plano, Illinois, U.S., on Wednesday, May 15, 2019.

Daniel Acker / Bloomberg / Getty Images

A monthly measure of homebuilder sentiment only partially reflected the escalating economic effects of the coronavirus. Sentiment fell 2 points to 72 in March, according to the National Association of Home Builders/Wells Fargo Housing Market Index. 

Sentiment levels have stayed in a tight range in the low- to mid-70s for the past six months. Anything above 50 is considered positive. The HMI stood at 62 in March 2019.

 “It is important to note, half of the builder responses in the March HMI were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will be reflected more in next month’s report,” said NAHB chief economist Robert Dietz. 

 Potential buyers worry about being out in public and about their financial health, as the stock market craters and businesses shut down. Real estate agents for existing homes saw a significant slowdown in buyer traffic at Sunday open houses this past weekend. Some companies have chosen to cancel open houses.

 Of the index’s three components, current sales conditions fell 2 points to 79, sales expectations in the next six months dropped 4 points to 75, and traffic of prospective buyers decreased 1 point to 56.

 In the survey, the NAHB also asked about supply-chain disruptions relating to the coronavirus.

 “Overall, 21% of builders in the survey report some disruption in supply due to virus concerns in other countries such as China. However, the incidence is higher (33%) among builders who responded to the survey after March 6, indicating that this is an emerging issue.”

 Regionally, on a the three-month moving average, builder sentiment in the Midwest fell 2 points to 66, dropped 1 point in the South to 77 and declined 1 point in the West to 82. In the Northeast, sentiment rose 2 points to 64.

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