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Home Builder Confidence Falls, First Time in Nearly a Year

After showing steady and healthy gains through much of last year, home builder sentiment took a step backward in February.

This is the first decline in eleven months, as the National Association of Home Builders' monthly confidence index now stands four points shy of the line between positive and negative. The index, which mirrors closely the volume of new housing starts, is 18 points higher than it was one year ago and near the highest level since May of 2006.

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"This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit, but it's also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens," noted NAHB chairman Rick Judson in a release.

Of the three components making up the index, current sales conditions fell one point to 51, still the only component solidly in the positive. Sales expectations over the next six months rose one point to 50, but buyer traffic remained the weakest, falling four points to 32.

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Regionally the Northeast saw improvements in builder sentiment, as did the West, but the Midwest and South both slipped, down two points each. The Northeast is seeing gains in construction due to the rebuilding effort following Superstorm Sandy. That was apparent in another index released Monday gauging home remodeling. The Buildfax remodeling index showed seasonally adjusted annual rates of remodeling in the Northeast at 636,000 in December of 2012 — up 39 percent from November and up 37 percent from a year ago.

"The last time the Northeast broke 600,000 estimated residential remodels was five years ago," wrote BuildFax's Joe Emison in a release. "Unfortunately, the rest of the country saw both month-over-month and year-over-year declines in residential remodeling activity."

Nationally, remodeling activity fell 6 percent monthly and from a year ago. The reasons are varied but may include the fact that home sales have been falling, and investors, who are buying distressed homes to remodel, have been finding scant inventory.

Current homeowners were also facing the possibility of the economy going over the fiscal cliff in December. Now, with possible sequestration looming, which could involve thousands of job cuts, both home buying and remodeling may reverse course further.

—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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