U.S. homebuilder sentiment plunged in April to the lowest level in more than seven years as the coronavirus pandemic kept potential buyers quarantined and paralyzed construction in much of the country.
Confidence among builders tumbled to 30 from a measure of 72 in March, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released Wednesday. It was the biggest monthly decline in the 30-year history of the index and the lowest reading since June 2012.
The unprecedented drop “is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities,” Dean Mon, the group’s chairman, said in a statement.
An S&P index of homebuilder shares fell on the news, dropping 5.85% at 10:23 a.m. New York time.
April’s measure was the first time the index fell below 50 since June 2014. A reading below that level indicates more builders view conditions as poor than good. The gauge reached 76 at the end of 2019, the highest in two decades.
Before the pandemic hit, the market for newly built houses was showing signs of strength, with sales in January and February at their fastest pace since the Great Recession, according to Robert Dietz, the group’s chief economist.
But with stay-at-home orders in place across much of the country, “builders have seen very significant declines in buyer traffic and they’re facing a variety of different business challenges, including some states that have deemed home construction not an essential activity,” Dietz said in an interview before the survey was released. “We’re expecting significant declines in all kinds of housing activity during the second quarter, stabilization in the third and then recovery in the fourth.”
There’s no historical precedent for the precipitous plunge in housing and economic activity, Dietz said.
“I can’t think of an example of such a sudden stop of the economy,” he said. “But at the same time, that suggests the potential to come back online. So I think we’re kind of in uncharted waters.”
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