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Builder Confidence Ebbs, But Still Solid Overall
Even though overall builder confidence retreated from March levels, the National Association of Home Builders (NAHB) called the April reading of the NAHB/Wells Fargo Housing Market Index (HMI) "solid." The index dropped from what NAHB said was an unusually high March reading of 71 to 68. The index had surged by 7 points month-over-month in March. Economists polled by Econoday had expected the index would better consolidate that gain, projecting an HMI between 69 and 71 with a consensus of 70.
"Even with this month's modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers," said NAHB Chairman Granger MacDonald.
NAHB surveys its new home builder members monthly, asking them to express their perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. NAHB has conducted the survey for more than 30 years.
All three HMI components posted losses in April. The components gauging current sales conditions fell three points to 74 while the index charting sales expectations in the next six months dropped three points to 75. There was a 1-point drop in the component measuring buyer traffic, to 52.
"The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction," said NAHB Chief Economist Robert Dietz. "However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices."
Regional HMI as expressed as three-month moving averages. A 1-point gain in the HMI in both the West and Midwest regions brought them to 77 and 68 respectively. The South held steady at 68, and the Northeast fell two points to 46.