Builder confidence slunk back to January levels this month, according to a report released today by the National Association of Home Builders.

The NAHB/Wells Fargo Housing Market Index for March dropped two points to 15, down from 17 in February, the report said.

"The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time," said David Crowe, the association’s chief economist.

"That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand."

The impact of poor weather conditions on builders’ business was also a factor, the association said.

The index gauges builder confidence with three components, the report said: builders’ perceptions of current single-family home sales; their sales expectations for the next six months (both on a scale of "good", "fair" or "poor"); and their perception of current perspective buyer traffic ("high to very high," "average" or "low to very low").

The three are combined to give a seasonally adjusted index figure in which any number below 50 means that more builders view market conditions as poor than good.

This month, perceptions of current sales conditions fell two points to 15, sales expectations fell three points to 24, and traffic fell two points to 10, the report said.

Regionally, the Northeast and West saw gains in confidence — a five-point gain to 23 in the former and a one-point gain to 15 in the latter. The Midwest and South saw declines — a three-point dip to 10 in the former and a one-point dip to 18 in the latter.

The association has conducted the monthly builder confidence survey since 1985. The index has not seen a score over 50 since April 2006, when it was 51. The index saw its first single-digit score in November 2008, when it fell to 9 from 14 the month before.


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