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Wells Fargo

Home builder confidence takes a hit in April

Ray Goldbacher, USA TODAY
Construction workers raise a wall on a new home in Sunnyvale, Calif.  After largely falling for six years, U.S. home prices were up 6.3% in October year-over-year.
  • Home builder index fell 2 points in April
  • Components for current sales and buyer traffic fell
  • But outlook for future sales remained robust

Increasing costs for building materials and rising concern about the supply of developed lots and labor pushed home builder confidence down in April.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) showed a two-point drop to 42, the association said Monday.

"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," said Rick Judson, National Association of Home Builders (NAHB) Chairman and a home builder from Charlotte, N.C. "While sales conditions are generally improving, these challenges are holding back new building and job creation."

"Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession," said NAHB Chief Economist David Crowe. "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 NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months .The survey also asks builders to rate traffic of prospective buyers. Scores are then used to calculate a seasonally adjusted index where a number over 50 indicates that more builders view conditions as good than poor.

While the component of current sales conditions declined two points to 45 and the component of buyer traffic declined four points to 30 in April, the component for sales expectations in the next six months posted a three-point gain to 53 – highest level since February of 2007, the NAHB said.

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