Rising Costs, Tight Credit Hammer at Home-Builder Confidence

Rising Costs, Tight Credit Hammer at Home-Builder ConfidenceThe rising costs of building materials and limited supplies of developed land to meet demand are putting strains on home-builder confidence, along with persistently tight lending for construction and home purchases.
Builders registered less confidence in April with a two-point drop to 42 on the closely-watched housing market index from the National Association of Home Builders and Wells Fargo.
A score above 50 would indicate that more builders are confident about housing conditions than those who are not.
“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, National Association of Home Builders (NAHB) Chairman and a home builder from Charlotte, N.C.
While sales conditions are improving overall, these challenges are restricting new building and creation of construction jobs.
“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,” said NAHB Chief Economist David Crowe.
However, builders’ outlook for the next six months has improved from the low inventory of for-sale homes, historically low mortgage rates and rising consumer confidence.
The index component gauging current sales conditions declined two points to 45, and the component gauging buyer traffic declined four points to 30 in April.
However, the component gauging sales expectations in the next six months posted a three-point gain to 53 – its highest level since February of 2007.
Looking at three-month moving averages for regional index scores, the Northeast was unchanged at 38 in April, while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42, and the West posted a three-point decline to 55.

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