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US Homebuilder Confidence Suffers a Downturn in February

By Allison Halliday | February 21, 2014

This month US builders have seen their confidence levels in the housing market sharply decline, largely due to the severe weather that has affected much of the country and which is keeping buyers at home. The cold weather and winter storms have affected builders’ anticipation of sales before the spring home selling season begins, and this could impact the rate of home construction.

The National Association of Home Builders/Wells Fargo builder sentiment index was recently released and had dropped to just 46 compared to a reading of 56 in January. This is the lowest level seen since last May, and readings below 50 show builders think the sales conditions are negative rather than positive. In fact the outlook for sales of single-family homes during the next six months and the outlook for traffic by would-be buyers have both declined since last month. Builders’ outlook for single-family home sales over the next six months has dropped to 54 points, a decline of six points. Traffic for would-be buyers fell 9 points to just 40.

© compuinfoto -

© compuinfoto -

Before this latest index reading the outlook had been above 50 since last June as the property market continued to strengthen. This latest reading is worrying, especially as the spring selling season tends to set the trend for the following months. Last year sales of new homes increased to reach 428,000, which was the highest level seen in five years. It's perfectly normal for sales to slow down in November and December, but this year's harsh weather conditions have amplified this seasonal decline. It's being predicted that sales of new homes will have fallen for the third month in a row for January.

The weather has also has an effect on the general economy as retail and auto sales have both declined and this does affect the demand for new property. In addition builders are still struggling with a shortage of ready to build land, a lack of readily available building materials and skilled labor. In spite of this latest index economists anticipate property prices and sales will continue to rise this year. Over the past two years the property market has been steadily recovering, boosting economic growth and job creation. Even though home construction rates slowed in December the year was still the best since the housing crisis began.

New home construction only represents a tiny proportion of the real estate market but the article in points out it has a considerable impact on the economy. It's estimated each new property creates three jobs for a year, and generates around $90,000 in tax revenue.

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.
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