by Calculated Risk on 4/16/2007 01:55:00 PM

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NABH Press Release: Builder Confidence Recedes Further In April

Deepening problems in the subprime mortgage market continued to take a toll on builder confidence in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The index declined three points to 33 in April, its lowest level since December of 2006.

“The tightening of mortgage lending standards in connection with the subprime crisis has shaken the confidence of both consumers and builders, as reflected in this report,” said NAHB Chief Economist David Seiders. “Indeed, the unfolding effects of this crisis have compelled NAHB to trim our forecasts of home sales and housing production for both 2007 and 2008,” he said. “While we still expect to see some improvements in housing market activity beginning later this year, the downside risks and uncertainties surrounding that forecast are considerable.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

All three component indexes registered declines in April. The index gauging current single-family home sales fell three points to 33, while the index gauging sales expectations for the next six months declined six points to 44 and the index gauging traffic of prospective buyers declined a single point, to 27.

All four regions posted HMI declines in April, with the Northeast showing a one-point decline to 38, the Midwest registering a five-point decline to 22, the South posting a three-point decline to 37, and the West posting a two-point decline to 35.

“The subprime shakeout clearly is a serious matter for the single-family housing market,” noted NAHB President Brian Catalde, a home builder from El Segundo, Calif. “Builders in the field are reporting adverse effects on both sales and cancellations at this time, and it remains to be seen how serious these effects will be as we move through the spring home buying season.”