The April NAHB home builder sentiment index rose 1 pt m/o/m to 45 as the consensus expected with 50 the breakeven between expansion and contraction. The Present Situation and Future Outlook components did get back to 50 with the former at 51 and the latter exactly at 50 but Prospective Buyers Traffic remained deeply below at 31.
What has helped to lift the builder mood is the lack of inventory of existing homes on the market. I’ve said before that I’ve seen multiple examples of 5-10 bidders over ask for an existing home. The NAHB, in addition to dealing with high rates faced by the buyer, also “continues to be plagued by building material issues, including lack of access to electrical transformer equipment.”
This was an interesting stat from the NAHB, “Currently, one third of housing inventory is new construction, compared to historical norms of a little more than 10%. More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023.” Credit is still tight though for builders with regards to Acquisition, Development and Construction Loans and I said this morning that for the week ended April 5th bank loans outstanding for this category has fallen by $5b in the past two weeks which is the biggest number I’ve seen over the past 8 years.
Bottom line, the visibility is clear as mud if one is a home builder. I’ll repeat here what the CEO of Lennar said last month in their earnings release because I still think it applies, “As we have seen over the past quarters, interest rates are fluctuating and are likely to continue to move, and the housing market will continue to rebalance pricing and interest rates. While we have a clear cut strategy of execution, we will only give broad boundaries for deliveries and gross margin.”
I expect too for the upcoming earnings season for ‘broad boundaries’ of guidance to be given in light of the foggy economic environment rather than anything more specific and tight.
NAHB
Prospective Buyers Traffic