U.S. Home-Builder Index Falls
To a More Than Four-Year Low
by Rex Nutting
From Dow Jones Newswires
April 19, 2006
U.S. home builders are just as likely to say the construction market is "poor" as they are to say it's "good."
The U.S. housing market index fell by four points to a reading of 50 in April, the lowest level since the recession ended in November 2001, the National Association of Home Builders said Monday. The index was at 67 a year ago.
A reading of 50 indicates builders' views about the market were evenly balanced between good and bad. The March index was revised lower to 54 from 55 previously.
The survey shows builders are somewhat optimistic about the current sales climate and about sales in the next six months. But the traffic of prospective buyers at developments isn't hopeful.
Rising mortgage rates, a growing stock of housing that's priced out of the reach of many prospective buyers, and the withdrawal of speculative buyers from the market fueled the decline in the index, said David Pressly, a home builder from Statesville, S.C., who is president of the builders group. "The market is heading to a more sustainable level of activity."
Views of builders in the West and South, the hottest regions for new construction, remain positive. In the West, the home builders' index rose to 70 from 66 in March. The index for April sits at 55 in the South, 49 in the Northeast and 32 in the Midwest.
The survey comes a day before the Commerce Department reports on the pace of construction of new homes for March. Economists see housing starts falling about 4% to a seasonally adjusted annual rate of 2.04 million in March, on the heels of an 8% drop in February from January's 33-year high.
In April, the index for current sales of single-family homes fell from 59 to 54, the lowest since November 2001.
The index for future sales of single-family homes fell from 62 to 58, also the lowest since November 2001.
The index for traffic of prospective buyers fell from 40 to 39, the lowest since March 2003.
The numbers "are neither surprising nor alarming," said David Seiders, chief economist for the builders' industry group. A reduction in speculative buying "is a positive development," he said. "Furthermore, we expect solid growth in employment and household income to essentially offset the minor increases" in mortgage rates projected this year.
In other economic reports released Monday, the Treasury Department said foreign capital inflows strengthened in February to $86.9 billion.
Separately, the New York Federal Reserve said manufacturing activity in the state decelerated in April.
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