Reflecting the growing effects of the COVID-19 pandemic, builder confidence in the market for newly built single-family homes plunged 42 points in April to 30, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. The decline in April was the largest single monthly change in the history of the index and marks the lowest builder confidence reading since June 2012. It is also the first time that builder confidence has been in negative territory (below 50) since June 2014.
"This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities," says Dean Mon, NAHB chairman. "Meanwhile, there continues to be some confusion over builder eligibility for the Paycheck Protection Program, as some builders have successfully submitted loan applications while others have not been able to. NAHB is working with the White House, Treasury and Congress to get the broadest builder participation possible. Home building remains an essential business throughout most of the nation, and as the pandemic shows signs of easing in the weeks ahead, buyers should return to the marketplace."
"Before the pandemic hit, the housing market was showing signs of strength with January and February new home sales at their highest pace since the Great Recession," says Robert Dietz, NAHB chief economist. "To show how hard and fast this outbreak has hit the housing sector, a recent poll of our members reveals that 96 percent reported that virus mitigation efforts were hurting buyer traffic. While the virus is severely disrupting residential construction and the overall economy, the need and demand for housing remains acute. As social distancing and other mitigation efforts show signs of easing this health crisis, we expect that housing will play its traditional role of helping to lead the economy out of a recession later in 2020."
The HMI index gauging current sales conditions dropped 43 points to 36, the component measuring sales expectations in the next six months fell 39 points to 36 and the gauge charting traffic of prospective buyers also decreased 43 points to 13.