The National Association of Home Builders (NAHB)/Wells Fargo housing market index fell by two points in March to 44. The January reading of 47 was the highest for the index since April 2006. An index reading below 50 indicates that more builders view sales conditions as poor than view them as good. The reading was below an expected reading of 47.

The NAHB’s chairman noted:

Following eight consecutive months of improvement, builder confidence leveled off in January and has since edged down several points. Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals.

Subindexes that measure current sales conditions and sales expectations came in at 47 and 51, respectively, in March. The subindex that estimates traffic of prospective buyers rose three points to 35.

The NAHB index remains below 50, having fallen for the second consecutive month. A shortage of building lots and a supply chain that was decimated by the collapse in home prices are taking time to rebuild. Uncertainty about the U.S. economy as expressed in consumer sentiment indexes is also likely a factor in the decline in builder confidence.

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