Builder Confidence Holds Steady in March

Home builder confidence in the market for newly built single-family homes held steady in March, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index was unchanged at 62 in March. (a score over 50 indicates builders view conditions as good than poor). The HMI component charting sales expectations in the next six months rose by three points to 71; the index gauging current sales conditions increased by two points to 68; but the component measuring traffic of prospective buyers fell by four points to 44.

Regionally, three-month moving averages showed the Northeast posted a five-point gain to 48; the South rose by three points to 66; and the West increased bytwo points to 69. The Midwest posted a one-point decline to 51.

“In a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week,” said NAHB Chief Economist Robert Dietz. “Increased inventory of affordably priced homes–in markets where government policies support such construction–will enable more entry-level buyers to enter the market.”

“Home builders are generally upbeat headed into the spring selling season,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Builder sentiment has rebounded from the lows hit late last year, as builders are balancing optimism with pragmatism.”

The report noted, however, that while demand for lower-priced homes remains very strong, such homes are in short supply and buildable lots remain scarce. NAHB said the skilled worker shortage, lack of buildable lots and stiff zoning restrictions in many major metro markets are among the challenges builders face as they strive to construct homes that can sell at affordable price points.

“Traffic will need to increase in order to meet builders’ improved expectations, which have been bolstered by lower mortgage rates,” Vitner said.