The National Association of Home Builders (NAHB)/Wells Fargo housing market index for March slipped two points from a prior reading of 55 in February to 53. The reading was well below a consensus forecast of 56 from a Bloomberg survey.

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions subindex slipped three points in March to 58, and the sales expectations subindex remained unchanged at 59. The subindex that estimates prospective buyer traffic dropped from 39 to 37. The buyer traffic subindex remains stubbornly below 50 and has for months, and the NAHB noted that the overall downturn in the index this month is expected to reverse as the spring buying season heats up.

NAHB’s chief economist said:

The drop in builder confidence is largely attributable to supply chain issues, such as lot and labor shortages as well as tight underwriting standards. These obstacles notwithstanding, we are expecting solid gains in the housing market this year, buoyed by sustained job growth, low mortgage interest rates and pent-up demand.

In the NAHB’s four regions, the three-month moving average index rose in the Midwest from 54 in February to 56 in March. In the Northeast the reading fell two points to post a 43 index score, and the South also dropped two points, from 57 to 55. In the West the index tumbled seven points to 61.

The NAHB/Wells Fargo housing market index has remained in positive territory since last July, but the buyer traffic subindex could indicate more than just a seasonal downturn: first-time buyers may be staying away because lending requirements are stiffer and home prices have continued to increase, even if the increases are moderating.

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