Builder confidence slips, sector is frustrated
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today, builder confidence in the market for newly built, single-family homes fell two points in April, dipping to 42 meaning more builders remain pessimistic about the sector than optimistic. The NAHB cites rising building material costs and concerns over the supply of developed lots and labor.
“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, National Association of Home Builders (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.”
“Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues,” explained NAHB Chief Economist David Crowe. “That said, builders’ outlook for the next six months has improved due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence.”
Perception of sales expectations
The HMI component gauging current sales conditions fell two points to 45, but the component measuring buyer traffic fell four points to 30, both far below pre-recession levels.
The silver lining is that builders haven’t lost hope, as their expectations of sales for the next six months actually rose three points to 53, marking its highest level in six years.
Regionally, sentiment varied, with the the three-month moving averages for regional HMI scores revealing that the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42, and the West posted a three-point decline to 55.