Building sentiment among construction firms and major builders shed two points from March to fall to 42 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), continuing the downtrend since February 2013. The constant decline in single family home constructions has been attributed to the rising construction material prices.
The HMI is a sample based on perceptions of 300 or more builders, which operates as a gauge for determining current housing trends and predicting demand. The HMI is derived by NAHB from a monthly survey that it has been conducting since the past 25 years.
According to the survey, current sales conditions declined two points to fall to 45 while buyer traffic declined four points to 30 in April. Apparently, any HMI number less than 50 indicates that more number of builders think that sales are poor, explains CalculatedRISK.com.
"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," Rick Judson, chairman of NAHB said in a statement.
In another report released by the Associated General Contractors of America (AGC), it was revealed that prices of construction materials, albeit high, remained flat in March. Due to the falling costs of diesel fuel, steel, aluminum and copper, key construction material costs remained unchanged since February.
However, cost of lumber, plywood, gypsum, plastics, roofing material and paints spiked up a notch. Experts believe that the volatile and unpredictable prices may lead some contractors to leave business.
"Contractors have held the line on pricing, even as costs shoot up for some items they buy. The net effect of these diverse changes is that some contractors may be squeezed out of business if they are caught by an unanticipated price spike," Ken Simonson, chief economist for construction trade association, said in the report.