The Wells Fargo National Association of Home Builders Index is crashing. Builder Sentiment (my calculation) is at record lows dating to 1985.
I created the above chart from a data download courtesy of the National Association of Home Builders and Wells Fargo,
This article was originally published by Mish Talk.
The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.
Methodology
My chart uses displays the three components from the download with a calculation that matched the stand alone NAHB index table.
NAHB Wells Fargo Housing Market Long-Term Index
Chart Comments
Home Builder Look-Ahead Sentiment
Unprecedented Look-Ahead Sentiment
Homebuilder sentiment as measured by the difference between current conditions and expected conditions six months ahead is at record lows.
Normally builders are an optimistic group. Note the overwhelming percentage of times sentiment is better than current conditions, even in three of the last four recessions.
Current sentiment is at unprecedented levels. Don’t expect builders to build a lot of homes on spec hoping to sell them.
New Homes for Sale
On April 26, I noted New Home Sales Take a Big Dive From Upward Revisions.
Let’s put a spotlight on new homes for sale.
With sentiment this low, most of those 110,000 homes for sale that have not yet been started will not be started.
For Sale Construction Details
Yet, those homes count towards inventory.
On April 26, I made this comment:
Realistically, there are 295,000 homes for sale not 406,000. The 110,000 not started yet is a new record that tops the housing bubble years.
When buyers dry up, and it’s happening now, who knows if and when those not started yet actually get started.
Q&A on Started Homes
Q: Will builders be in a rush to finish homes that have started but not sold?
A: For multi-family homes, yes. Builders need to finish. The rest depend on how close to finish the builder is. If the “start” is little more than a hole in the ground, don’t expect those homes to finish anytime soon.
Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway
Existing home sales provide an additional piece of sentiment data.
Please consider Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway
I am confident a housing bust has just started and a global recession will soon be underway.
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