THE NATIONAL ASSOCIATION OF HOME BUILDERS just released the latest home builders confidence survey results for March, a measure of the health of housing since 1985. The index fell, for the third straight month, to a reading of 53, though any reading over 50 indicates more builders consider conditions more good than poor.

The survey asks single-family home builders to rate current sales expectations, traffic of prospective buyers and sales expectations over the next six months.

“The drop in builder confidence is largely attributable to supply chain issues, such as lot and labor shortages, as well as tight underwriting standards,” NAHB Chief Economist David Crowe said. “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.”

A look at the historical information reveals another sign that our economy has not recovered fully from the Great Recession. A rating of 53 is still above the threshold of a poor outlook, but well below historical norms for years of relative prosperity.

Following the savings and loan crisis of 1987, these ratings dipped and never quite recovered; then in 1991 ratings fell as low as 20, followed by modest gains. Confidence rose as high as 71 in December 1993; 1994 was a year of relative prosperity but by December, as the nation approached another recession, the rating had dropped to 43.

By 1996 the levels had risen again into the 60s and 70s; after a minor blip during the Dot Com Recession, by 2002 home builders were again reporting renewed confidence and ratings were consistently in the 60s and 70s until 2005. Levels then started to slip, but still reflected relative confidence until May 2006, when that confidence fell below 50 to a rating of 46.

Of course we all know what happened next: the Great Recession and frozen credit markets in late 2008. By January 2009, builder confidence hit an all-time low of 8, and didn’t break 30 again until May 2012. Since the economic recovery began, confidence has not been higher than the 59 of September 2014.

The current rating of 53, while not bad, does not necessarily paint a rosy picture of what the nation’s builders are expecting for the future of new home sales. I tend to be an optimist and want to believe that our housing market and economy will continue chugging along, and continue to improve. It is interesting to me that Mr. Crowe cites “tight underwriting standards” as a reason for concern: Is this a case of underwriting standards in fact being so tight that they are restricting economic growth? Or is it really a perception not truly based on the reality of current underwriting standards, or more specifically changes that have been made recently to relax the standards a bit and bring the pendulum back a little closer to center?

I think the current slowdown in economic activity and corresponding drop in builder confidence has more to do with consumers being more cautious before making big purchases. Stashing cash seems to be the way now, more so than in many years.

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.height=”150″ />

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