An index of U.S. home builder sentiment fell for a fourth consecutive month in April to its lowest since November 2001, the National Association of Home Builders said Wednesday.
The drop was in response to rising mortgage rates, continued affordability problems and subsiding demand from investors and speculators, the trade group said.
The NAHB/Wells Fargo Housing Market index slid to 50 in April, seasonally adjusted, from March’s downwardly revised 54. It was the lowest reading since November 2001, when it stood at 48.
“Home builders definitely view this as something of a transition period, where demand from speculators is easing off and the market is heading to a more sustainable level of activity following the record-breaking performance of 2005,” said NAHB President David Pressly, a home builder in Statesville, N.C., in a press release.
The confidence level indicates the majority of builders see conditions as neither positive nor negative in their markets, the NAHB said. Readings above 50 indicate more builders view their market conditions as favorable, rather than poor.
The index was also below its year-ago level of 67.
NAHB Chief Economist David Seiders said the decline in sentiment was neither surprising nor alarming with mortgage rates back up to the 6.5 percent range and serious affordability issues in the highest-priced markets.
“Indeed, a reported reduction in home buying by investors/speculators in the market for new single-family homes is a positive development. Furthermore, we expect solid growth in employment and household income to essentially offset the minor increases in the interest-rate structure that we’re projecting for the balance of this year,” he said.
The NAHB said its index for current sales of new homes fell to 54 in April from a downwardly revised 59 in March.
The index measuring builder sentiment over the next six months slipped to 58 from 62 in March, while the potential buyer traffic index fell to 39 from an upwardly revised 40.