The National Association of Home Builders (NAHB)/Wells Fargo housing market index fell by two points in April to 42. The January reading of 47 was the highest for the index since April 2006. An index reading below 50 indicates that more builders view sales conditions as poor than view them as good. The new reading was below an expected 46 for April.

The NAHB’s chairman noted:

Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values. While sales conditions are generally improving, these challenges are holding back new building and job creation.

Subindexes that measure current sales conditions and sales expectations came in at 45 and 53 in April. The subindex that estimates traffic of prospective buyers fell four points to 30. The reading for sales expectations is the highest since February 2007.

As in March, the NAHB points to a shortage of building lots, a broken supply chain and skilled workers following the housing collapse. The group expects these conditions to recover over time. Uncertainty about the U.S. economy as expressed in consumer sentiment indexes is also likely a factor in the decline in builder confidence.

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