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Economic Watch: Homebuilder, Consumer Confidence Ease

February 17, 2015

By Evan Lockridge

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Builder confidence in the market for newly built, single-family homes in February fell two points to a level of 55, according to the National Association of Home Builders/Wells Fargo Housing Market Index released on Tuesday.

“Overall, builder sentiment remains fairly solid, with this slight downturn largely attributable to the unusually high snow levels across much of the nation,” said NAHB Chairman Tom Woods.

The decline follows the index falling to 57 in January from 58 in December. A reading above 50 is considered favorable and has been above this level since last June.

Two of the three HMI components posted losses in February. The component gauging current sales conditions edged one point lower to 61 while the component measuring buyer traffic fell five points to 39. The gauge charting sales expectations in the next six months held steady at 60.

“For the past eight months, confidence levels have held in the mid- to upper 50s range, which is consistent with a modest, ongoing recovery,” said NAHB Chief Economist David Crowe. “Solid job growth, affordable home prices and historically low mortgage rates should help unleash growing pent-up demand and keep the housing market moving forward in the year ahead.”

Looking at the three-month moving averages for regional HMI scores, the Northeast fell a single point to 46, and the Midwest and South each posted a two-point drop to 54 and 57, respectively. The West rose two points to 68.

This report follows one last Friday showing consumer sentiment in the U.S. also slipped this month, according to the University of Michigan Survey of Consumers.

The Index of Consumer sentiment, used to gauge the strength of consumer spending, registered 93.6, down 4.6% from January when it hit an 11-year high, but was 14.7% more compared to February 2014. This latest reading is the second highest since January 2007.

Consumer feelings about current conditions were also down for the month compared to January but were up from a year earlier along with their assessment of expectations.

“Consumer optimism slipped in early February due to renewed concerns over employment and wage growth as well as a diminished outlook for the domestic economy,” said Richard Curtin, chief economist for the Survey of Consumers.

He said latest reading showed the February decline was larger among residents of the Northeast and Midwest, who had to cope with unusually harsh winter storms, while residents of the South posted modest increases in confidence.

“Low gas prices have especially helped lower income households, although consumers now widely anticipate that gas prices will edge upward during the year ahead,” Curtin said. “The small reversals in early February are hardly sufficient to alter last month’s more favorable forecast that real personal consumption expenditures will grow by 3.3% in 2015.”

 

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