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Builder Confidence Plunges as Buyers Shy Away

Poor weather combined with existing credit and labor concerns to bring homebuilder confidence down this month to its lowest level in the better part of a year.

The National Association of Home Builders’ (NAHB) Housing Market Index (HMI), released in partnership with Wells Fargo, posted a 10-point decline to 46 in the group’s latest report. It was the first time since May 2013 that the index measured below 50, the “neutral” point between a market viewed as “good” or “bad.”

The index measures builder confidence in newly built, single-family homes based on current home sales, expected sales six months out, and observed traffic of prospective homebuyers—the latter faring the worst over the month, falling nine points to 31.

“Significant weather conditions across most of the country led to a decline in buyer traffic last month,” explained NAHB chairman Kevin Kelly. Kelly also noted concerns about meeting demand now and in the near future “due to a shortage of lots and labor.”

The gauge of single-family sales at present also saw a significant drop, declining 11 points to 51. Meanwhile, the index measuring sales expectations for the next six months fell six points to 54.

All four regions measured by NAHB reported overall declines in confidence, with losses ranging from seven points (down to 46) in the South to 14 points (down to 57) in the West.

The three-month moving average for each region was a little better, reflecting the relative strength of the last few indexes. Declines were observed in the Midwest (which lost one point, sliding to 57), the South (down three points to 53), and Northeast (down four points to 38), which remained the only region in which more builders viewed market prospects as positive rather than negative.

Despite the region’s huge one-month decline in confidence, the West’s three-month average stayed flat at 63.

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