April Builder Confidence Dips But Remains Solid

Builder confidence for newly built single-family homes fell by three points in April, the National Association of Home Builders reported in its Housing Market Index yesterday.

The national Index fell to 68 after an “unusually high” March reading, NAHB said. 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. Meanwhile, the component measuring buyer traffic edged one point down to 52.

Regionally, three-month moving averages saw the West and Midwest both rise by one point to 77 and 68, respectively. The South held steady at 68, while the Northeast fell by two points to 46. Scores for each component calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

“Despite the pull-back, confidence remains relatively high,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “The present sales index has trended above 70 for five consecutive months, signaling strong demand for new homes.”

“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.”

Vitner noted the solid readings for builder sentiment coincide with stronger reports for retail sales at home improvement stores, which are up solidly on a three-month annualized basis. “Residential investment is one of the few bright spots for first quarter growth,” he said.

Last week, the Mortgage Bankers Association reported mortgage applications for new home purchases surged in March by 23 percent from February and by 6.7 percent from a year ago to the highest point since inception of the Mortgage Bankers Association’s Builder Application Survey.

“The pickup from a fairly modest February showing suggests that developers are finding ways to bring new product on line to help supplement otherwise low inventories of existing homes for sale in the U.S.,” said MBA Vice President of Research and Economics Lynn Fisher.

MBA estimated new single-family home sales came in at a seasonally adjusted annual rate of 670,000 units in March, an increase of 14.3 percent from February (586,000 units). On an unadjusted basis, MBA estimated 62,000 new home sales in March, an increase of 21.6 percent from 51,000 in February.