Summary: Builder confidence is often a good indicator of the state of the housing market and when prospective buyers should make a move. But the opposite might also be true. Is now a good time for you to buy in Washington State? This article will outline the current state of builder confidence and will provide some suggestions about whether or not today is a good time to buy in Washington.
Many times real estate market experts point to the feelings of the nation’s home builders as a bell-weather signalling the health of the housing sector.
Last month’s reading indicates that home builders are not feeling too confident, likely as a result of the looming coronavirus pandemic.
The National Association of Home Builders / Wells Fargo Housing Market Index (HMI) for March for new single-family home construction plummeted 42 points to 30, compared to March’s reading of 72.
Builder sentiment levels have held steady in the low- to mid-70s over the past six months. Those were healthy numbers, signifying strong confidence among home builders and creating a great environment for home buyers to get into the real estate market.
Mortgage interest rates are still incredibly low, and tight inventory creates opportunities for home builders, but it doesn’t look like many are taking the steps.
Home Builder Confidence Drops to Lowest Level since 2012
The National Association of Home Builders’ Index saw its biggest monthly decrease ever in April. There is no doubt that the COVID-19 pandemic is wreaking havoc on the housing market, creating negative home builder sentiment.
The monthly index is based on the NAHB’s monthly survey to builders, asking them to rate multiple measures in regards to the real estate market. Readings over 50 point to improving confidence, while numbers under that level signify the opposite. April 2020 marks the first time since 2014 that the index dipped under 50.
Other regional factors influencing builder confidence include difficulties in finding building sites, labor required for building new homes, and rising costs for building materials impacting home buying ability and home prices.
3 Important Categories Affect The Home Builders Index
The HMI is a seasonally-adjusted index comprised of three survey categories of home builder confidence.
Readings above 50 indicate that more builders are finding conditions good within each category and overall:
- The HMI index measuring current sales conditions dropped 42 points to 30.
- The measuring of prospective buyers declined 43 points to 13.
- The measuring of sales expectations over the next six months decreased 39 points to 36.
- As per the three-month moving averages for regional readings, the Northeast dropped 34 points to 19, the Midwest declined 42 points to 25, the South also declined 42 points to 34, and the West decreased 47 points to 32.
Despite such negative numbers, there is still demand for homes across the nation. As such, home prices may still continue to increase over the spring and into the summer.
Of course, the current coronavirus pandemic is impacting the decisions that both buyers and sellers make. But given the fact that mortgage rates are near historic lows and and expected to continue on this path, it may be worth considering buying a home sooner rather than later.
Check with your real estate and mortgage professional for the most updated market details in your area.
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