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Builder confidence falling

By Judy Martel · Bankrate.com
Tuesday, March 19, 2013
Posted: 11 am ET

The rising costs of building materials and labor, along with "bottlenecks" in the supply chain for developed lots, have caused homebuilder confidence to drop for the third month in a row, according to the National Assoociation of Home Builders, or NAHB.

Rick Judson, chairman of the NAHB, calls the bottlenecks "frustrating" for single-family homebuilders, who had remained positive for eight months in a row before January. He also attributes the drop in confidence to problems with appraisals, along with difficulties for borrowers trying to get mortgages.

Below the line

The NAHB/Wells Fargo index measures three components, with 50 being the line between positive and negative sentiment. The index currently measures 44. Two of the index components -- sales expectations for the next six months and buyer traffic -- improved, but current sales fell by 4 points.

The South and Midwest continue to be the regions where confidence is lowest, with builders in the West gaining confidence. In the Northeast, builder sentiment remains unchanged.

"During the Great Recession, the industry lost homebuilding firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots," the NAHB's chief economist, David Crowe, said in a statement. "The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year."

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