Housing Market Dips in Early March 2022

The NAHB/Wells Fargo Housing Market Index (HMI) recorded a slight decline in early March 2022, per preliminary information launched on March 16, 2022. The preliminary nationwide HMI for March was 79, down from a revised worth of 81 for February. After hitting a latest low of 75 in August 2021, the HMI peaked at 84 in December 2021. For the reason that housing sector is a big consider total U.S. financial exercise, the HMI is broadly used as a key financial indicator.

The HMI outcomes from a month-to-month survey of Nationwide Affiliation of Residence Builders (NAHB) members. The NAHB states that the HMI “is designed to take the heartbeat of the single-family housing market.” Respondents charge present market situations for the sale of recent properties, forecast these situations over the subsequent six months, and assess the quantity of visitors from potential consumers of recent properties.

Lumber Provide and Pricing Points

On March 14, 2022, NAHB Chairman Jerry Konter urged the Biden administration to extend home manufacturing of timber from federal lands and to work with Canada on a brand new softwood lumber settlement that may remove tariffs. Konter indicated that dwelling constructing materials prices have risen by 20% on a year-over-year foundation. He added that, since August 2021, the worth of framing lumber has greater than tripled, and the worth of oriented strand board (OSB) has doubled.

Konter advised contributors within the session that lumber manufacturing has not stored tempo with demand regardless of file excessive lumber costs and that tariffs are elevating prices for builders and residential consumers alike. He famous that, in October 2021, home lumber manufacturing was solely 0.4% increased than within the earlier yr. He added that it’s decrease at the moment than in 2018, regardless of elevated demand. Furthermore, he noticed that home sawmill employment rose by solely 500 jobs final yr regardless of traditionally excessive lumber costs.

Konter warned, “Traditionally excessive value ranges for lumber and different constructing supplies are dramatically affecting dwelling costs and rental prices and threaten the nation’s financial stability.” He added, “These provide chain value will increase have solely added to the continuing housing affordability disaster.”

HMI Elements

The NAHB/Wells Fargo HMI is a weighted common of three separate element indices: Current Single-Household Gross sales, Single-Household Gross sales for the Subsequent Six Months, and Visitors of Potential Consumers.

The Current Single-Household Gross sales index had a preliminary worth of 86 in March. This was down from 89 prior to now two months and from a latest excessive of 90 reached in December 2021.

The Single-Household Gross sales for the Subsequent Six Months index had a preliminary worth of 70 in March. This was down sharply from 80 in January and was the bottom studying since 79 in June 2021. The worth of this index over the last three months of 2021 ranged from 84 to 85.

The Visitors of Potential Consumers index had a preliminary worth of 67 in March, up from a revised worth of 65 for February. The latest peak for this measure was 71 in December 2021.

Regional Indexes

Along with the nationwide determine cited above, the HMI is also computed for 4 areas: Northeast, Midwest, South, and West.

Evaluating the preliminary March 2022 figures to the revised February 2022 numbers, there was a pointy weakening within the Northeast (60 vs. 76) and a lesser decline within the South (80 vs. 84) however strengthening within the Midwest (73 vs. 71) and no change within the West (secure at 91).

Evaluating the preliminary March 2022 figures to three-month transferring averages, two areas confirmed weakening: the Northeast (60 vs. 69) and the South (80 vs. 83). Slight will increase in energy had been recorded within the Midwest (73 vs. 72) and the West (91 vs. 90).

HMI Methodology

Every month, a panel of NAHB member builders charges the primary two elements (Current Single-Household Gross sales and Single-Household Gross sales for the Subsequent Six Months) on a scale of “good,” “truthful,” or “poor.”

The panel charges the final element (Visitors of Potential Consumers) on a scale of “excessive to very excessive,” “common,” or “low to very low.”

An index is calculated for every sequence by making use of the components “(good – poor + 100)/2” or, for Visitors, “(excessive/very excessive – low/very low + 100)/2.” 

Every ensuing index is first seasonally adjusted, then weighted to provide the HMI. The weights are .5920 for Current Gross sales, .1358 for Gross sales for the Subsequent Six Months, and .2722 for Visitors. The weights had been chosen to maximize the correlation with housing begins throughout the next six months.