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Home Builder Confidence Hammered by Rising Costs

A recently constructed home stands next to a home under construction in Las Vegas, Nevada, U.S.
Jacob Kepler | Bloomberg | Getty Images
A recently constructed home stands next to a home under construction in Las Vegas, Nevada, U.S.

Confidence among U.S. home builders fell in April, as concerns over lack of developed land lots and rising costs for building materials weighed heavily. A monthly industry index fell two points, the third consecutive month of declining builder sentiment in single family homes, after solid gains throughout much of 2012.

"Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues," explained National Association of Home Builders Chief Economist David Crowe.

The NAHB's monthly confidence index now stands at 42, up from 24 in April of 2012. Fifty is the line between positive and negative. The index gauging current sales conditions fell two points, while buyer traffic declined four points. Sales expectations over the next six months posted a three point gain to its highest level since February of 2007.

Regionally, on a three-month average, home builder confidence was unchanged in the Northeast and fell in the other three regions with the South seeing the deepest decline. Builders in the West have been particularly hard hit by lack of land and labor, as a heavy investor presence in the distressed market has pushed other buyers to new construction, creating unexpected high demand.

"Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," said Rick Judson, NAHB's Chairman and a home builder from Charlotte, N.C. "While sales conditions are generally improving, these challenges are holding back new building and job creation."

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

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  • 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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