Homebuilder Confidence Falls for the First Time This Year

April 16, 2012

For the first time in seven months, builder sentiment has dropped.

According to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence in the market for newly built, single-family homes fell three points in April to 25.

Economists had expected the index to rise a point to 29.

The index posted increases from September through February and remained unchanged in March. This month’s reading brings it back to where it registered in January, though on the plus side, January’s index registered its highest level since 2007.

“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.”

Each of the index’s components declined in April:

*The component gauging current sales conditions fell three points to 26.

*The component gauging sales expectations in the next six months fell three points 32.

*The component gauging traffic of prospective buyers fell four points to 18.

The news isn’t good for the Chicago real estate region, especially. The index in the Midwest fell a whopping eight points in April to 23. The South dropped three points to 24 and the West posted no change at 32. The Northeast, however, increased four points to 29 to record its highest level since May of 2010.

“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,” said Barry Rutenberg, chairman of the National Association of Home Builders.

The new-home industry still has a long way to go to recover. Any index below 50 means more builders view conditions as negative. The last time the index was that high was in 2006, during the peak of the housing boom.

Categories: Economy, New Homes

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