For the third straight month, sentiment among U.S. home builders declined in March, dropping two points on a monthly industry index. Confidence among builders had been rising for eight straight months until January amid rising home prices, low supplies of existing homes and increased consumer demand.
"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," said Rick Judson, a home builder from Charlotte, N.C. and chairman of the National Association of Home Builders. "At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals."
The NAHB/Wells Fargo Housing Market Index measures three key components of sentiment. Both buyer traffic and sales expectations over the next six months improved, but current sales conditions fell four points. Fifty is the line between positive and negative on the monthly survey. The overall index now stands at 44.
Sentiment was mixed regionally, with home builders gaining confidence in the West but losing ground in the South and Midwest. Confidence was unchanged in the Northeast, where several states are still seeing huge backlogs of homes in the foreclosure process. In the West, builders are rushing to meet new demand, as investors in distressed properties have pushed supplies to extremely low levels.