U.S. homebuilders' confidence in the housing market declined sharply this month as the severe weather battering much of the nation keeps many would-be buyers at home.
Storms and cold weather dampened builders' outlook for sales ahead of the spring home-selling season and could further slow the pace of home construction.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday slid to 46. That's down from January's reading of 56 and is the lowest level since May.
Readings below 50 indicate that more builders view sales conditions as poor rather than good.
Builders' view of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers have all declined since January.
The overall index had been above 50 since June, reflecting a strengthening housing market. The latest reading complicates the outlook for sales just as the annual spring buying season ramps up. Typically, the spring season sets the pattern for residential hiring and construction in the ensuing months.
Sales of new homes jumped 16.4 percent last year to 428,000, the highest level in five years. Sales typically slow in November and December. %VIRTUAL-article-sponsoredlinks%But this winter's onslaught of snowfall and freezing temperatures has exacerbated the seasonal slowdown. Economists predict that sales of new homes fell for the third month in a row in January.
The builder survey adds to reports showing that severe weather this winter has taken a toll on the economy. Auto sales fell 2.1 percent in January and posted their first year-over-year drop in sales since August 2010. Retail sales also tumbled last month after a smaller decline in December.
"The weather also hurt retail and auto sales, and this had a contributing effect on demand for new homes," said David Crowe, the NAHB's chief economist.
Builders also continue to grapple with a shortage of skilled workers and ready-to-build land and delays in obtaining building materials, Crowe noted.
Those factors and the weather dimmed the outlook for some of the respondents polled in the latest NAHB survey, which included responses from 321 builders.
A measure of current sales conditions for single-family homes dropped 11 points to 51. Builders' outlook for single-family home sales over the next six months fell 6 points to 54. And a gauge of traffic by prospective buyers slid nine points from last month to 40.
Even so, most economists expect U.S. home sales and prices to keep rising this year.
The housing market has been recovering steadily over the past two years, helping boost economic growth and hiring. Home construction slowed in December but ended 2013 with the best showing since the housing bubble burst.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.
9 Numbers That'll Tell You How the Economy's Really Doing
U.S. Homebuilder Confidence Sinks in February
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.