Infrastructure Challenges Sap Builder Confidence Despite Increased Demand

The National Association of Home Builders (NAHB)/Wells FargornHousing Market Index, a measure of home builder confidence, slipped again inrnMarch, the third month in a row it has failed to make gains.  The index had increased for eight consecutivernmonths reaching a level of 47, the highest in many years, in December beforernpausing in January, then slipping to 46 in February and to 44 in today’srnreport.  </p

The HPI is based on a monthly survey of NAHB’s home-builderrnmembers in which they are asked to gauge the current market for newlyrnconstructed single family homes and estimate the market over the next sixrnmonths on scales of “good,” “fair” or “poor.”   They are also asked to rate traffic ofrnprospective buyers as “”high to very high,” “average”rnor “low to very low.” Scores from each component are then used torncalculate a seasonally adjusted index and the composite HPI.  Any number over 50 indicates that morernbuilders view conditions as good than poor.</p

The HMI component gauging current sales conditions declinedrnfour points to 47 but the component gauging sales expectations in the next sixrnmonths rose one point to 51 and the component gauging traffic of prospectivernbuyers gained three points to 35. </p

NAHB Chairman RickrnJudson notes that “Although many of our members are reporting increased demandrnfor new homes in their markets, their enthusiasm is being tempered byrnfrustrating bottlenecks in the supply chain for developed lots along withrnrising costs for building materials and labor. At the same time, problems withrnappraisals and credit availability remain considerable obstacles to completingrndeals.”<br /<br /"In addition to tight credit and below-price appraisals, home building isrnbeginning to suffer growth pains as the infrastructure that supports it triesrnto re-establish itself,” explained NAHB Chief Economist David Crowe.rn”During the Great Recession, the industry lost home building firms,rnbuilding material production capacity, workers who retreated to other sectorsrnand the pipeline of developed lots. The road to a housing recovery will be a bumpyrnone until these issues are addressed, but in the meantime, builders are muchrnmore optimistic today than they were at this time last year.”</p

NAHB uses a three month moving average to track the HMI on arnregional basis.  These averages werernmixed with  the Northeast unchanged atrn39, the Midwest and South posting one-point declines to 47 and 46,rnrespectively, and the West registering a four-point increase to 58.</p

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