Builder Confidence Levels Off as Construction Season Nears

Homebuilder confidence slipped a notch in February as concerns about rising lumber prices, labor costs and land availability seem to be rising.

Builder confidence edged down one point from January to 46 in February, according to a National Association of Home Builders/Wells Fargo survey released Tuesday morning.

Any reading above 50 on the housing market index indicates more builders view conditions as good than poor.

“Following solid gains over the past year, builder confidence has essentially leveled out and held in the same three-point range over the last four months,” said NAHB chairman Rick Judson.

“This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit, but it’s also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens,” the Charlotte, N.C., builder said.

NAHB chief economist David Crowe noted that index has “hit a slight pause” as builders adjust their expectations for sales this spring and summer.

“The index remains near its highest level since May of 2006, and we expect homebuilding to continue on a modest rising trajectory this year,” Crowe said.

Last year, builders started construction on 535,500 single-family units, up 24% from 2011. Economists at Wells Fargo Securities are forecasting that builders will break ground on 680,000 single-family units in 2013.

A separate NAHB/Wells Fargo survey found that more than 75% of builders expect building materials prices to be one of their significant problems in 2013. The second most significant problem involves the cost and availability of labor.