Subprime Worries Weigh on Builders

An index measuring the confidence in home-sales conditions tumbles.
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Problems in the subprime mortgage market continued to take a toll on homebuilders' confidence about the housing market in April, a trade group said Monday.

The monthly National Association of Home Builders/Wells Fargo Housing Market Index declined 3 points to 33 in April, its lowest level since December.

A number over 50 indicates that more builders view sales conditions as good than as poor.

Homebuilder stocks were mixed after the report was released Monday afternoon.

Centex

(CTX)

rose 49 cents to $44.10, while

KB Home

(KBH) - Get Report

fell 13 cents to $41.16.

"The tightening of mortgage lending standards in connection with the subprime crisis has shaken the confidence of both consumers and builders, as reflected in this report," said NAHB Chief Economist David Seiders in a statement.

"Indeed, the unfolding effects of this crisis have compelled NAHB to trim our forecasts of home sales and housing production for both 2007 and 2008," he said. "While we still expect to see some improvements in housing market activity beginning later this year, the downside risks and uncertainties surrounding that forecast are considerable."

The index gauging current single-family home sales fell three points to 33, while the index gauging sales expectations for the next six months declined six points to 44. The index gauging traffic of prospective buyers declined a single point to 27.

There were confidence declines from all four of the nation's regions in April, with the Midwest index registering the biggest decline -- five points -- to 22. The Northeast showed a one-point decline to 38, the South posted a three-point decline to 37, and the West saw a two-point decline to 35.

"The subprime shakeout clearly is a serious matter for the single-family housing market," said NAHB President Brian Catalde, a homebuilder from El Segundo, Calif., in a statement. "Builders in the field are reporting adverse effects on both sales and cancellations at this time, and it remains to be seen how serious these effects will be as we move through the spring home buying season."