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U.S. Homebuilder Confidence Fell in April to Three-Month Low

Confidence among U.S. homebuilders fell in April to a three-month low, a sign the industry is still trying to gain its footing.

The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 25 this month from 28 in March, the Washington-based group said today. Economists projected no change in the index, according to the median forecast in a Bloomberg News survey. Readings below 50 mean more respondents said conditions were poor.

Borrowing costs close to all-time lows, population growth that may spur more demand for homes and cheaper properties are helping stabilize residential real estate. At the same time, the recovery may take time as the prospect of more foreclosed homes returning to the market competes with new construction.

“Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase,” Barry Rutenberg, chairman of the National Association of Home Builders and a builder from Gainesville, Florida, said in a statement. “Our members are realigning their expectations somewhat until they see more actual signed sales contracts.”

Estimates in the Bloomberg survey of 48 economists ranged from 27 to 30. The gauge, which was first published in January 1985, averaged 54 in the five years leading up to the 18-month recession in December 2007. It reached a record low of 8 in January 2009.

The builders group’s index of current single-family home sales declined to 26 this month from March’s reading of 29.

Sales Expectations

A measure of sales expectations for the next six months dropped to 32 from 35 in March, while the gauge of buyer traffic decreased to 18, the lowest this year, from 22.

Builders in the Midwest led the April decline, with that region’s index falling 8 points to 23 this month. Sentiment also fell in the South. In the Northeast, builder confidence climbed by 4 points to 29 in April, the highest since May 2010.

“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” David Crowe, chief economist for the builders group, said in a statement. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery.”

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor,” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

Room for Optimism

More than four years after housing helped trigger the recession, builders say they see room for optimism.

Buyers “are starting to feel pressure not to miss this moment,” Lennar Corp. Chief Executive Officer Stuart Miller said during a March 27 conference call with analysts. “The fully loaded cost of ownership is lower in the most-desirable markets than comparable rental rates.”

New-home orders increased 33 percent in the three months ended Feb. 29, the third-largest U.S. homebuilder by revenue said. Shares of the Miami-based company rose to the highest level since 2007 after it reported orders growth and net income that beat estimates.

A report from the Commerce Department tomorrow will show that housing starts in the U.S. rose in March, according to the median forecast in a Bloomberg survey.

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