The Truth Behind February's Home Builder Confidence Decline

The Wells Fargo/NAHB Builder Confidence survey, for February, reported a historic drop in Builder Confidence. The report was hyped and in some cases further embellished on many television stations and in print sources. The apparent source of this drastic decline in Home Builder confidence was the 9% drop in February’s prospect traffic. Come on, give me a break!
 
Why is the press so eager to jump on a doom and gloom housing recovery story? Worse, why are the egos of the Wells Fargo/NAHB home builder respondents so FRAGILE? In true Ground Hog Day fashion, too many builders think they saw their shadow and projected six more weeks of housing doldrums. How about instead of reporting that home builder confidence “craters,” the press (and these despondent builders) look at the “why” behind the February traffic decline numbers? Anyone who has been in homebuilding for more than a few years knows that February “prospect traffic” numbers can swing dramatically. And anyone in home building, regardless of their tenure, knows that Sundays are the highest traffic producing days of the week.
 
Apparently it escaped the press that in 2014, there were only FOUR Sundays and one of those Sundays drew the highest Super Bowl ratings in history (111.5 million viewers)…basically reducing February to just THREE Sundays. This alone should have negatively impacted prospect traffic by 9 or more percent. Then, when we factor in the 4,000+ hours of Winter Olympic television coverage, AND the worst winter in several decades, aka the “Polar Vortex” we are lucky traffic didn’t drop 30+%!
 
Interestingly, not 48 hours after the press reported the Wells Fargo/NAHB builder confidence crisis, January's New Home Sales were reported at multi-year highs – in fact, the highest monthly sales rate since May of 2008. Why was this good news, big confidence booster, not as widely covered? The ongoing one-sided doom and gloom press reporting definitely has a confidence suppressing effect and has been the bane of the home building recovery for going on 5 years now. Don’t you think it is time to stop “accentuating the negative?”
 
Our recent study (published in the February edition of Professional Builder Magazine – see Growing Pains), suggests that the average customer centric builder’s year-over-year sales were up 32%, with backlogs up 37% and 90+% of the survey participants are very optimistic about 2014. This is quite the contrast to the Wells Fargo/NAHB February survey.

The danger is that builders who buy into the Wells Fargo/NAHB confidence crisis and/or the other negatively skewed press reports may under invest in their land, talent and operations, to the point that they may miss out on this incredible housing rally. In fact, we should not call it a rally, yet!  Even though new home sales have tripled, they can still triple again just to get back to historical “normal” housing start numbers (not the overinflated 2006 & 2007 markets – just back to normal)!

We are encouraging our clients to invest in land, people, customer centric products and customer centric processes NOW, so they can capitalize on the multi-year wave of new home sales in front of us. Home building has always required good business sense, smarts and confidence to succeed. Allowing some willy nilly, now-you-see-me-now-you don’t housing recovery skeptics to influence your company's opportunity to capitalize on the current market rebound is sure to leave you frustrated in the long run.
 
One of the worst Snowmageddon winters on record, combined with the largest Super Bowl Sunday viewer ratings ever, 4,000+ hours of Winter Olympic television coverage, and a February shorted at least one Sunday - and these factors only reduced prospect traffic by 9%? That’s great news! Keep the faith and confidence fellow home builders you will be rewarded.