By Robert Dietz, NAHB Chief Economist
The most recent NAHB/Wells Fargo Housing Market Index (HMI), a measure of builder confidence in the new single-family home market, reflected the sudden turn in market conditions. Confidence fell from a level of 72 in March to a level of 30 in April — the largest drop in the history of the sentiment indicator. April marked the first time the HMI fell below the neutral level of 50 since mid-2014, and it was its lowest reading since mid-2012 in the wake of the Great Recession. All components of the index posted large declines, including buyer traffic and future sales expectations.
April's HMI is consistent with other macroeconomic readings that reveal a sudden and sharp plunge for economic conditions following government-imposed shutdowns of social and economic activity to help mitigate the spread of the coronavirus. Jobless claims increased by almost 17 million in recent weeks, and sectors of the economy have shed jobs to cut costs. The March employment report showed an increase in the unemployment rate from 3.5% to 4.4%, but given the wave of unemployment claims, that rate will likely surge in April to above 10%.
NAHB forecasts a significant decline in the second quarter GDP growth rate of at least 20%. Given ongoing economic and financial strains, we are anticipating a decline in the third quarter as well, although recent numbers of confirmed coronavirus cases are showing declines for the daily growth rate. Current data indicate the possibility that mitigation efforts will be successful by mid-May, allowing at least a partial re-opening of the economy. However, "normal" conditions should not be expected until a vaccine is developed.
Nonetheless, recent and historical data suggest the housing sector will again be a primary driver in the economic recovery. New NAHB estimates indicate that 2,950 jobs are supported by every 1,000 single-family homes built. Likewise, 1,250 jobs are supported by every 1,000 new apartments built. And 750 jobs are supported by every $100 million in remodeling activity.