Builders?EUR??,,????'??? Market Confidence Takes a Hit

A key metric of home builders?EUR??,,????'??? confidence fell in April for the first time since September.

Home builders this month backpedaled from the optimism that had been growing in the new single-family housing market since last fall. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index dropped three points to 25 in April, after six consecutive months of improvement.

The Index is created from responses to a monthly survey in which NAHB asks its builder-members for their perceptions of the current single-family home sales market, expectations for sales over the next six months, and to rate the current traffic of prospective buyers. Components or a composite number above 50 mean that more builders view conditions as good than poor.

All three categories declined in April. The component measuring market perceptions dropped from 29 to 26, and the expectations component fell three points to 32. Responses to builder traffic landed at 18, down four points from March. April marks the first decrease since the index crawled out of the teens last winter.

"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 until they see more actual signed sales contracts," said Barry Rutenberg, NAHB chairman. Much of the decline came from the Midwest, where the composite fell 8 points to 23. The South also declined, from 27 to 24. The West was unchanged at 32, while the Northeast jumped four points to 29, the highest level in nearly two years.

"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."