Builders' confidence falls in March

NEW YORK (CNNMoney.com) -- Home builders' confidence took a hit in March, according to a members' survey by their trade group conducted amid growing reports of problems in the subprime mortgage market.

The National Association of Home Builders' survey showed that the group's confidence index fell to 36 in March from a 39 reading in February. The February reading was also revised lower.

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It was the first decline in the index since it fell to a 15-year low of 30 in September.

"Builders are uncertain about the consequences of tightening mortgage lending standards for their home sales down the line, and some are already seeing effects of the subprime shakeout on current sales activity," said a statement from David Seiders, chief economist for the trade group.

Even during the recent rebound, the index has stayed well below the 50 mark, the point at which builders' view of the market is equally balanced between those who see it as good and those who see it as poor. But while the overall index hasn't been above the 50 mark since April 2006, the last six months had suggested that builders were looking forward to better times ahead, even if current traffic remained at historically weak levels.

In fact the outlook for builders' view of the market over the coming six months had climbed to 53 in the February index, the first time any component had reached above 50 since June of last year. But that outlook reading fell back to 50 in the most recent survey.

The index showed a slight increase for the home building outlook in the West, edging up to a reading of 36 from 35 in February, and in the Midwest, which rose to 28 from 27. But the South, which accounts for nearly half of the nation's home building, fell to 40 from a previous reading of 44.

The most recent set of financial reports and outlook from publicly traded home builders have generally been glum.

The CEO of D.R. Horton (Charts), the largest U.S. homebuilder, told an investor conference earlier this month that "'07 is going to suck." Earlier this month New Jersey builder Hovnanian Enterprises (Charts) became the latest to report a loss late Thursday, following operating losses at Pulte Home (Charts), KB Home (Charts), and Centex (Charts). Even builders still reporting earnings, such as D.R. Horton and Toll Brothers (Charts) have reported sharply lower income.

The report also comes ahead of Tuesday's government report on housing starts and building permits. The slowdown in home building is seen as a major drag on the nation's overall economy, even if housing economists see a need to have building slow in order to let builders and home owners move a glut of new and existing homes now on the market.

Economists surveyed by Briefing.com forecast starts edged up to a seasonally adjusted annual rate of 1.45 million in February from a nine-year low of 1.41 million in January. The report also includes a reading on building permits, which are also seen as a measure of builder confidence, is expected to slip again to 1.55 million from a 1.57 million pace in January. Permits for single-family homes hit a six-year low in January.

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Subprime woes: How far, how wide?