Rising Costs Dampens Home Builder Confidence

---

Builder confidence in the U.S. market for newly built, single-family homes declined for the third consecutive month, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. 

Builders registered a two-point drop to 42 in April from the previous month on the survey's component measuring current sales conditions, citing increasing costs for building materials and concern regarding supply of developed lots and labor. There was a four point drop to 30 in April in the component measuring buyer traffic.

"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," National Association of Home Builders chairman Rick Judson said.   It will take some time for the "supply for building materials, developed lots and skilled workers" to re-establish confidence, according to NAHB Chief Economist David Crowe said.  

However, builder's expectation for the next six months was up by three points to 53, the highest level since February 2007. The improving sentiment is due to "low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence," Mr. Crowe said.   The Northeast region remained at 38 in April while the Midwest decreased two points to 45, the South decreased four points to 42 and the West decreased three points to 55.