Builder confidence in the market for newly built, single-family homes in March fell two points to a level of 53 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“Even with this slight slip, the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season,” said Tom Woods, NAHB chairman and a home builder from Blue Springs, Mo.

David Crowe, NAHB chief economist added, “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.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components posted losses in March. The component gauging current sales conditions fell three points to 58 while the component measuring buyer traffic dropped two points to 37. The gauge charting sales expectations in the next six months held steady at 59.

Looking at the three-month moving averages for regional HMI scores, the Northeast and South each posted a two-point drop to 43 and 55, respectively. The Midwest rose two points to 56, while the West fell seven points to 61.

For more information, visit housingeconomics.com.