Builder confidence drops slightly on supply-chain challenges

Home builder confidence fell slightly in March over growing frustration of the cost and availability of the supplies they need to pick up the pace of construction. 

As the housing market improves and demand increases for new single-family homes, builders are struggling to get the supplies and labor they need as those businesses try to recover from the prolonged economic downturn. 

That led to a two-point drop in confidence down to 44, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released on Monday. 

"In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself," said David Crowe, NAHB's chief economist. 

"During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots," he said. 

"The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year."

While component gauging current sales conditions declined four points to 47, sales expectations for the next six months was up by one point to 51 and the part of the index measuring traffic of prospective buyers rose three points to 35.

The three-month moving averages for each region also were mixed.

The Northeast held at 39, the Midwest and South each posted one-point declines to 47 and 46, respectively, and the West registered a four-point increase to 58.

"Following eight consecutive months of improvement, builder confidence leveled off in January and has since edged down several points," said Rick Judson, NAHB's chairman and a home builder from Charlotte, N.C.

"Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. 

"At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals."