Rising material costs curb builder confidence

An index that measures homebuilder confidence dropped in April, largely attributed to the increasing costs of building materials, concerns about the lack of supply of developed lots, and labor shortage, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

The index measures builder perceptions of single-family home sales and sales expectations. In the latest reading for April, builder confidence dropped two points to 42. Any number below 50 indicates that more builders view conditions as poor than good.

“Supply chains for building materials, developed lots, and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues,” said David Crowe, NAHB chief economist.

“That said, builders’ outlook for the next six months has improved due to the low inventory of for-sale homes, rock-bottom mortgage rates, and rising consumer confidence.”

A component in the index that measures builders’ sales expectations in the market for the next six months posted a three-point gain in April, reaching 53 – the highest level since February 2007.