The Wells Fargo National Association of Home Builders Index is crashing. Builder Sentiment (my calculation) is at record lows dating to 1985.

(Click on image to enlarge)

NAHB data, chart by Mish

I created the above chart from a data download courtesy of the National Association of Home Builders and Wells Fargo,

The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

Methodology

• The NAHB/Wells Fargo HMI is a weighted average of three separate component indices: Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers. Each month, a panel of builders rates the first two on a scale of “good,” “fair” or “poor” and the last on a scale of “high to very high,” “average” or “low to very low”. 
• Each resulting index is first seasonally adjusted, then weighted to produce the HMI. The weights are .5920 for Present Sales, .1358 for Sales for the Next Six Months, and .2722 for Traffic. The weights were chosen to maximize the correlation with starts through the following six months.

My chart uses displays the three components from the download with a calculation that matched the stand alone NAHB index table. 

NAHB Wells Fargo Housing Market Long-Term Index

(Click on image to enlarge)

NAHB data, chart by Mish

Chart Comments 

• The long-term chart shows just how wild present conditions became. The present conditions index peak was 96 in November of 2020 in the wake of a Covid rebound. 
• Conditions remained very strong for a year, easily exceeding the housing bubble peaks.
• Each component is now sinking rapidly, especially traffic. 

Home Builder Look-Ahead Sentiment 

(Click on image to enlarge)

NAHB data, chart and calculation by Mish

Unprecedented Look-Ahead Sentiment 

Homebuilder sentiment as measured by the difference between current conditions and expected conditions six months ahead is at record lows.

Normally builders are an optimistic group. Note the overwhelming percentage of times sentiment is better than current conditions, even in three of the last four recessions.