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Monday's sentiment reading from the National Association of Home Builders came in at the lowest level since October, but the cause of the dip offered some hope that the recovery still has legs.
The NAHB survey came in at 42, down from 44 in March, but Chairman Rick Judson attributed the decline to "frustration over being unable to respond to the rising demand for new homes," rather than weakening sales, citing "difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values."
The outlook for the next six months is also better, said NAHB chief economist David Crowe, thanks to lower inventory of homes available for sale, mortgage rates near record levels and better consumer confidence.
High Frequency Economics' Jim O'Sullivan expects a soft housing starts tally Tuesday, but thinks a cold snap in March is more to blame for that figure and other recent readings that have been weaker than anticipated, rather builder sentiment.
Paul Diggle at Capital Economics says the third-straight monthly decline in the NAHB figure is "not yet cause for panic," but does offer a reminder of the challenges still facing the housing recovery.
Today's problems though -- more expensive materials, tighter lending standards and a shortage of skilled labor -- are far less pernicious than the lack of demand and massive supply overhang builders dealt with in the aftermath of the financial crisis.
Last month, Raymond James analysts upgraded a handful of builders and raised earnings estimates on the group based on conversation with management teams and field research in key markets in states like Texas, California, Nevada and Florida.
They found that rising prices and increasing demand would be a tailwind, but also spotted the headwinds that cropped up in Monday's sentiment report. However, the Raymond James team led by Buck Horne argued that the publicly-listed builders have an advantage with improving market share and the aggressive deployment of capital for new land, distancing themselves from smaller players.
The builders were in rough shape Monday, with
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