Home Builder Sentiment Falls

Dow Jones Newswires

U.S. home builders remained downbeat in May, reflecting a housing market struggling to regain traction well into the spring selling season.

An index of builders' confidence in the market for new single-family homes fell one point to a seasonally adjusted 45 in May, the lowest level in 12 months, the National Association of Home Builders said Thursday.

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A reading below 50 means builders generally see conditions as unfavorable. The index has been below that level for four consecutive months.

Economists surveyed by The Wall Street Journal expected the index would rise in May to 48. April's reading of 46 was revised downward from a previous level of 47.

The monthly decline was driven by builders' negative view of current sales conditions. However, their expectations for sales in the next six months improved, as did builders' assessment of traffic from potential buyers. The index declined by one point in the South and West, but held steady in the Northeast and Midwest.

The index had been as high as 58 last August, but took a sharp plunge in February--reflecting a weak winter season and continued pressure from higher mortgage rates.

Still, many in the housing industry and outside economists believe the market will recover after a temporary rough patch.

"Builders are waiting for consumers to feel more secure about their financial situation," said David Crowe, the NAHB's chief economist. "Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence."

The new-home market has been weaker than the market for previously occupied homes this year. Sales of newly built homes fell 14.5% in March to the lowest level since last July, after the harsh winter slowed down construction.

Prices also have been rising, making it hard for first-time buyers to afford a new home. The median price of a new home rose to $290,000 in March, the highest level on record, according to the Commerce Department.

The builders' group also says that labor shortages and a lack of space to build in many markets are holding back the housing market's recovery, along with tight credit conditions.