Builder sentiment indicates poor sales conditions
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 dropped to 25 in April, after March remained stagnant, and economists projected the index would rise to 29. When the index drops below 50, builders surveyed agree that sales conditions are poor.
This drop marks the first decline in seven months, bringing it back to January levels, which the NAHB notes was the highest level since 2007.
Builders’ confidence in current sales conditions fell three points to 26, and sales expectations for the next six months fell three points to 32, but the worst news is that sentiment regarding current foot traffic of prospective buyers fell four points to 18.
Regionally, the HMI results were somewhat mixed in April, with the Northeast posting a four-point gain to 29 (its highest level since May of 2010), the West posting no change at 32, the South posting a three-point decline to 24 and the Midwest posting an eight-point decline to 23.
Hesitant consumers, says the NAHB
“Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.
“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”