Homebuilder confidence in U.S. unexpectedly dropped in April

Confidence among U.S. homebuilders unexpectedly fell in April for a third month, restrained by rising costs for materials and financing restrictions.

The National Association of Home Builders/Wells Fargo index of builder confidence dropped to 42, the lowest since October, from 44 in March, the Washington-based group said today. Economists projected an index of 45, according to the median estimate in a Bloomberg survey. Readings below 50 mean more respondents said conditions were poor.

“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,” Rick Judson, the group’s chairman and a builder from Charlotte, North Carolina, said in a statement.

The report showed builders grew more concerned about current sales and buyer traffic, indicating demand has cooled along with the rest of the economy. Nonetheless, residential construction firms were the most optimistic about future sales than at any time in six years, a sign the industry will keep contributing to the expansion.

Projections for homebuilder confidence in the Bloomberg survey of 45 economists ranged from 43 to 47.

The homebuilder gauge, which was first published in January 1985, averaged 55 in the five years leading up to the 18-month recession in December 2007. It reached a record low of 8 in January 2009. In December and January, it reached the highest level in more than six years.

Component Breakdown

This month the builders group’s index of current single- family home sales declined to 45 following March’s reading of 47. The gauge of buyer traffic fell to 30 from 34.

The measure of sales expectations for the next six months climbed to 53, the highest since February 2007, from 50 in March.

All regions showed a decline in confidence, with builders in the Midwest leading the decrease. That region’s index dropped 8 points to 41 this month.

“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,” NAHB Chief Economist David Crowe said in a statement. “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.”

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

Bloomberg News

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