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Builders' Confidence Dropping from 2005

Washington — With mortgage rates rising and consumers fretting about whether they can afford to buy a new home, the outlook for the nation's single-family home builders is becoming more problematic, according to a monthly gauge of builder sentiment.

A measure of builder confidence compiled by the National Association of Home Builders (NAHB) and Wells Fargo Bank, the index dropped again in April, this time falling to its lowest level in more than a decade, since mid-1995. Builder confidence dropped off by six points during the month, falling to a level of 45.

NAHB continues to maintain that a “soft landing” scenario is being tracked. “Based on historical experience, particularly the 1994-1995 episode,” said the monthly report, the downward trend-line in builder sentiment “is not inconsistent with the orderly cooling-down process we're projecting for home sales and single-family housing starts in 2006,” said David Seiders, chief economist of the builders' trade group.

“We expect new-home sales to be off by 12% from the record posted in 2005. Single-family starts, supported by large builder backlogs of unfilled orders and reconstruction in the wake of last year's record-breaking hurricane season, should be down by about 7% from the 2005 record.”

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