Optimism Falling

By Jill Ralph. By most measures, the housing market is still strong. Applications to refinance mortgages reached record levels in March and existing home sales also topped the charts. However, builder confidence is falling, along with the NAHB’s housing market index, a measure of builder sentiment about sales and buyer traffic. In March, the index dropped from 62 to 52, representing the biggest one-month decline since the NAHB began the study in 1985.

Concerns over war with Iraq, weakness in the economy, and a colder-than-usual winter are clouding the outlook for the housing market, economists say. Mark Vitner, senior economist at Wachovia Corp., says mortgage rates have been low for a while now, so their ability to draw buyers into the market is waning. Vitner said other factors, such as job growth, are now increasingly important for generating housing growth.

The component indexes that comprise the NAHB’s housing market index each fell: The index gauging current single-family home sales fell 10 points to 59; the index for expected sales in the next six months fell 9 points to 57; and the index gauging traffic of prospective buyers fell 8 points to 35. An index reading of more than 50 indicates more builders view sales conditions as good rather than poor.

Track NAHB’s housing market index, updated each month, on BUILDER Online.