As the costs of building materials rise and the supply of lots and labor remains low, builder confidence dropped two points to 42 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) in April.
The HMI is derived from a monthly survey that NAHB has been conducting for 25 years, which 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.
"Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," said Rick Judson, NAHB chairman and a home builder from Charlotte, N.C. "While sales conditions are generally improving, these challenges are holding back new building and job creation."
However, builders' sales expectations for the next six months posted a three-point gain to 53, the highest level since February 2007. David Crowe, NAHB chief economist, cited the low inventory of for-sale homes, record-low mortgage rates and rising consumer confidence for the builders' optimism.
The net loss, though, comes from a four-point loss in perceived buyer traffic to 30 and a two-point drop in perceived current sales to 45.
