Builders Remain in a Holding Pattern, Expect Improvement

Builder confidence stayed mostly flat in April, nudging up slightly from a downward revision to March’s findings.

The National Association of Home Builders (NAHB) reported a one-point increase in its monthly Housing Market Index (HMI), a measure of builders’ confidence in the market for newly constructed single-family homes. March’s index was revised down to 46 from an originally reported 47.

Registering 47 as of the latest release, the index has now spent three straight months below 50, the threshold between a market viewed largely as “good” and one viewed as “bad.”

“Builder confidence has been in a holding pattern the past three months," said Kevin Kelly, NAHB chairman. “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.”

Of the three component indexes measuring housing conditions, the gauges for both current sales conditions and traffic of prospective buyers remained steady at 51 and 32, respectively. The measure for expected sales in the next six months climbed four points to 57, reflecting greater optimism among builders.

“Job growth is proceeding at a solid pace, mortgage interest rates remain historically low and home prices are affordable,” said NAHB chief economist David Crowe. “While these factors point to a gradual improvement in housing demand, 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.”

At the regional level, the Northeast was the only area to report increased confidence, posting an index of 36 compared to 30 in March. Sentiment was down in the Midwest and West and stayed flat in the South.

Looking at the three-month moving average for each regional HMI, all regions saw declines in March, with only the West hovering above the 50 mark.