Builder confidence in the new home market plunged in February, a combination of debilitating weather and few lots available for construction, a trade group said.
The National Assn. of Home Builders/Wells Fargo Housing Market Index tumbled 10 points from January to a seasonally adjusted level of 46, the largest drop since the index launched in 1985. A level higher than 50 means more builders see the market for new, single-family homes as good rather than poor.
February's level, released Tuesday, was the first time since May that the index was below 50.
The trade group said severe weather across much of the United States took a sharp bite out of builder confidence, as buyer traffic plummeted. Builders also reported they held sharply more negative views of current sales and expectations of sales in the next six months.
“The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes,” NAHB chief economist David Crowe said in a statement.
Still, there is more sapping builder confidence than ice and snow. In the West, which has been spared much of the severe weather, confidence fell the furthest, plunging 14 points this month.
In the Northeast and Midwest, the index fell 8 and 9 points, respectively.
Rapidly shrinking affordability has hurt the Western market, a major home building region, said Jed Kolko, chief economist with real estate firm Trulia.
“Over the past year, the biggest home price increases have been in the West,” he said.
Crowe said builders have other worries, including a shortage of skilled workers and ready-to-build lots.