Homebuilder Confidence Loses More Ground in March

Confidence among builders fell for the third consecutive month, according to an industry report.

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Confidence among homebuilders slipped again in March on concerns that a limited supply of lots and building materials will slow sales, an industry trade group reported Monday.

The National Association of Builders/Wells Fargo Housing Market Index fell 2 points in March to 44, marking the third consecutive month of losses in homebuilder confidence. Confidence had risen eight months in a row thanks to higher home prices, low inventory of homes for sale, and heightened consumer demand until January.

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The index is derived from a survey polling builders about their expectations for sales over the next six months, which are then scored. Readings above 50 indicate more builders surveyed view market conditions as "good" than not.

Experts blame the recent pullback on the recovering industry's "growing pains." One of the most battered sectors in the housing bust, homebuilding has only recently started to come back as the labor market improves and housing demand heats up.

"During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots," NAHB Chief Economist David Crowe said in a statement. "The road to a housing recovery will be a bumpy one until these issues are addressed."

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In the meantime, all the cogs in the homebuilding industry aren't as greased as they should be, creating frustrating bottlenecks in the supply chain, according to the report. Obstacles such as rising costs for building materials and the increasing scarcity of developed lots has tempered enthusiasm among builders when it comes to sales in the short term, driving down confidence numbers. Persistently tight credit—both for builders and would-be buyers—and below-price property appraisals also continue to plague the industry, Crowe said.

Regionally, figures were mixed with home builders gaining confidence in the West, but losing ground in the South and Midwest. Readings in the Northeast remained unchanged.

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  • Meg Handley is a reporter for U.S. News & World Report. You can follow her on Twitter or reach her at mhandley@usnews.com.