Homebuilder confidence rises slightly

Report on April sentiment was 'weaker than expected again — and fairly disappointing.'

By MSN Real Estate partner Apr 15, 2014 9:15AM

By Ben Leubsdorf, The Wall Street Journal


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 © Associated PressU.S. homebuilders remained downbeat in April, a sign the housing market is still shaky despite the arrival of spring.


An index of builder confidence in the market for new single-family homes rose 1 point to a seasonally adjusted 47 in April, the National Association of Homebuilders said Tuesday. A reading below 50 means more builders generally see conditions as bad than good.


Any winter weather-related issues should have faded by now, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. In a note to clients, he described Tuesday's report as "weaker than expected again — and fairly disappointing."

The index tumbled 10 points in February, to 46. It remained at 46 in March, revised down from an initially reported 47. Economists surveyed by The Wall Street Journal expected it would rise in April to 50.


Still, observers expect the market to work past the soft spot.


"Builder confidence has been in a holding pattern the past three months," said the trade group's chairman, Kevin Kelly. Sales prospects should improve in the coming months "as the spring homebuying season gets into full swing and demand increases," he said.

Barclays Capital economist Michael Gapen also is optimistic. "While homebuilder sentiment has started the year on a soft note, we expect that rising home prices, low inventory levels, and stronger demand will boost construction activity as the spring selling season progresses," he wrote in a note to clients.


The index was below 50 in all four regions of the country in April. It fell to 45 from 51 in the West and ticked down to 48 from 50 in the Midwest from March. It held steady at 48 in the South and rose to 36 from 30 in the Northeast.

Shortages of labor and building lots in a number of markets are holding back the housing market's recovery, along with tight credit conditions, said David Crowe, the NAHB's chief economist.


The U.S. housing market expanded robustly in 2013, but appeared to lose steam in the second half of the year as borrowing costs rose. A 30-year fixed-rate mortgage had an average interest rate of 4.34 percent last week, up from an average rate of 3.45 percent last April, according to Freddie Mac.


Rising prices have discouraged some potential buyers, as did unusually harsh weather across much of the U.S. this winter.


Existing-home sales fell in February to their lowest level since July 2012, the National Association of Realtors said. New-home sales declined in February, the Commerce Department said, and housing starts slipped, too.

But there was a bright spot. Building permits were up a seasonally adjusted 7.7 percent in February from the prior month, the Commerce Department said, a sign residential construction could rebound in the coming months.


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