Web exclusive: Retailers emboldened as builder confidence rises

Home COVID-19 Web exclusive: Retailers emboldened as builder confidence rises

By Ken Ryan

Flooring retailers see glimmers of sunshine breaking through the overcast when it comes to housing.

Flooring retailers looking for a bit of good news to rally behind can take solace in a May 18 Housing Market Index (HMI) showing builder confidence in the market for newly built single-family homes increased seven points to 37 in May. The report, released by the National Association of Home Builders (NAHB) and Wells Fargo, indicated the housing market is showing signs of stabilizing and gradually moving forward in the wake of the COVID-19 pandemic.

Retailers who spoke to FCNews welcomed the news, adding they are seeing signs of optimism in their markets. “Absolutely,” said Cam Haughey, co-owner, ICC Home/ICC Floors, Indianapolis. “Our builder numbers only dipped briefly and are back on the upswing. Low inventory levels in our market—paired with low rates—should be a pretty solid catalyst for a rebound.”

Eric Langan, president/owner of Carpetland USA (The Langan Group), with multiple locations throughout Iowa and Illinois, said the challenges presented by COVID-19 remain. However, he sees glimmers of sunshine peeking through the overcast. “There are still a lot of unknowns and many consumers who aren’t quite ready to venture out and shop for flooring,” he said. “However, with some restrictions lifting, I do feel a bit better about our business as a whole for the remainder of the year. It will be a grind-it-out kind of year for the balance of 2020 and the first half of 2021.”

In Appleton, Wis., Bill Huss, owner of D&M Interiors, sees enough positive signs to feel cautiously optimistic about the immediate future. “We weathered the shutdown with help from the government programs, but we still saw a jump in new construction through the process,” he said. “The resale housing market in our area has a shortage of inventory, and new home bids are coming in at a steady pace. The key for us will be how strong residential remodel work comes back.”

Builder sentiment moving in the right direction

The rise in builder sentiment follows the largest single monthly decline in the history of the index in April. “The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said Dean Mon, NAHB chairman. “At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.”

Interest rates remain favorable

Low interest rates are helping to sustain demand. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen,” said Robert Dietz, NAHB chief economist. “Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains, and signs that buyer traffic has improved in housing markets in recent weeks.”

Behind the numbers

Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

It’s worth noting that most HMI indices posted gains in May: The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21. Looking at the monthly average regional HMI scores, the Midwest increased seven points to 32, the South rose eight points to 42 and the West posted a 12-point gain to 44. The Northeast fell two points to 17.

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