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Homebuilder Confidence Stabilized in April

Robert M. Siegel & Manuel Gonzalez

On April 15th, the National Association of Home Builders (NAHB) released its National Association of Home Builders/Wells Fargo Housing Market Index (HMI), a widely followed gauge of the outlook for the U.S. housing sector. The report indicates that builder confidence in the market for newly built, single-family homes rose one point to 47 in April from a March reading of 46 (after being revised downward).

Derived from a monthly survey of NAHB’s members that NAHB has been conducting for 30 years, the HMI gauges builder 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.” Its result can range between 0 and 100 with any figure over 50 indicating that more builders view sales conditions as good compared with those who view them as poor.

Expectations Improved Slightly for Spring Buying Season Despite Lingering Concerns

The index gauging current sales conditions in April held steady at 51 while the component measuring the traffic of prospective buyers was 32, which also was unchanged. On the cusp of the spring buying season, expectations for future sales rose four points to 57.

“Builder confidence has been in a holding pattern the past three months,” said NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, DE. “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”

While homebuilder sentiment edged up in April, there are still lingering concerns about stiff credit conditions for buyers and tight supply of building lots and labor.

“Headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and the fact that builders in many markets are facing a limited availability of lots and labor,” NAHB Chief Economist David Crowe said.

The HMI three-month moving average was down in all four regions. The West fell nine points to 51 and the Midwest posted a four-point decline to 49, while the Northeast and South each dropped two points to 33 and 47, respectively.

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