Builder confidence fell two points in March to 44 compared with February, according to the National Association of Home Builders/Wells Fargo National Housing Market Index (HMI). After eight consecutive months of increases in 2012, January marked the beginning of a plateau.
The HMI is calculated based on builders' perception of single family homes sales, expected single family homes sales for the next six months and traffic of prospective buyers. While the average of these responses fell two points from the month before, respondents actually returned more positive responses regarding future home sales and buyer traffic. Unfortunately, builders lost confidence in present home sales, resulting in a four-point drop.
"Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots, along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals," said NAHB Chairman Rick Judson, a homebuilder from Charlotte, N.C.
NAHB Chief Economist David Crowe cites tight credit, below-price appraisals and post-recession industry restructuring for the dip. He said, "During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year."
