Builder confidence in the condominium market eroded significantly in the first quarter of 2007, fueled by an overwhelming supply and stricter mortgage lending rules, the National Association of Home Builders reported.

According to the latest results of the Multifamily Condo Market Index (MCMI), the component that tracks current conditions in the condo market stood at 23.1 in the first quarter, down nearly 14 points from this time a year ago. A rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses.

“There’s heavy excess inventory and now the shakeout in the subprime mortgage market has taken its toll on the for-sale side of the multifamily housing market,” NAHB Chief Economist David Seiders said in a statement. “The good news is new supply is being constrained, and that’s laying the groundwork for the subsequent recovery.” Seiders noted that, in many instances, multifamily developers who had begun for-sale projects are switching gears and delivering new rental apartment communities instead.

Although the component of the MCMI that gauges builders’ expectations for the next six months was, at 32.9, higher than the current conditions index, it is still lower than the 46 reading a year ago.

On the demand side, multifamily builders did indicate that prospective traffic of condo buyers had increased slightly in the first quarter, for an index number of 38.7, with about 19.7 percent of those surveyed indicating that they had experienced a higher level of traffic than in the previous quarter.

The MCMI is a quarterly, nationwide survey of multifamily builders and developers who are asked a series of questions about current market conditions as well as their expectations for the next six months. Survey answers are assigned numerical values on a 1 to 100 scale.

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