Over the last couple of months, measures of builder confidence have been significantly higher than seen in recent years, likely because the inventory of existing single-family homes has been historically low. This, paired with a high demand for homeownership has made buying and building more popular amongst those looking to make the investment. However, the latest Housing Market Index from the National Association of Home Builders/Wells Fargo, it was revealed that builder confidence in the market for newly built single-family properties slowed for the third time this year in March, dropping 2 points to 44.
While the national housing market has been experiencing notable improvements, the inventory of existing homes for sale is expected to grow after months of lingering at low levels. This will likely slow the buying of new homes for sale. Despite slight declines seen since the start of 2013, builder confidence is significantly higher when compared to HMIs from this time last year. NAHB chief economist David Crowe also credits the decline of home building firms and job opportunities throughout the recession.
"Following eight consecutive months of improvement, builder confidence leveled off in January and has since edged down several points," said Rick Judson, chairman of NAHB. "Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals."
According to data from the index, current sales conditions also dropped from the previous month, declining 4 points to 47. The HMI component that measures sales expectations, however, improved by a point to 51, while the factor gauging traffic of prospective buyers also rose by three points to 35 in March.
Different regions throughout the country saw mixed results, as highlighted by NAHB. In the Northeast, builders' confidence levels were unchanged, with the HMI remaining at 39. In the Midwest, confidence dropped one point by index measurements, bringing the index to 47, matching the one-point decline seen in the South where the HMI fell to 46. The West has had a more difficult time posting gains in many housing market factors, and the HMI slipped four points to 58. However, many housing in the West were less affected by the housing market slump that began in 2006, which is likely reason for small gains and losses mentioned in mortgage records and housing reports over the last 12 months.