Deepening problems in the subprime mortgage market continued to take a toll on builder confidence in April, which sent the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) down another three points in April.
Based on a monthly survey that measures builder perceptions and expectations for home sales, the index dropped to 33 in April from a reading of 36 in March. An index rating above 50 indicates that more builders view sales conditions as good, while a rating below 50 indicates that more builders view conditions as poor.
“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,” NAHB Chief Economist David Seiders said in a statement. “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.”
All three component indexes registered declines in April, NAHB reported. 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; 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,” NAHB President Brian Catalde, a home builder from El Segundo, Calif., said in a statement. “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.”