PhotoThe latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows builder confidence in the market for newly-built single-family homes fell three points to a level of 68 in April after surging to a 12-year high a month earlier.

“Even with this month’s modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers,” said NAHB Chairman Granger MacDonald.

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.”

The monthly survey used to compile the index also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.”

Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Builders' perceptions

All three HMI components fell in April but remain at healthy levels, according to NAHB. The components gauging current sales conditions fell three points to 74, the index charting sales expectations in the next six months was down three points to 75, and the buyer traffic component inched down one point to 52.

“The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” said NAHB Chief Economist Robert Dietz. “However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices."

The three-month moving averages for regional HMI scores show the West and Midwest both rose a point to 77 and 68, respectively, with the South holding steady at 68 and the Northeast falling two points to 46.

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