Index of home builder sentiment declines

U.S. home builders lost confidence this month amid concern that tighter credit standards would discourage would-be buyers.

The National Assn. of Home Builders/Wells Fargo index of sentiment fell to 36 this month from February’s revised 39, a seven-month high, the Washington-based association said Monday. A reading below 50 means most respondents view conditions as poor.

Home builders, struggling to recover after more than a year of slumping sales, face the possibility that a surge in defaults on sub-prime mortgages will make all types of home loans harder to get. That may cause a further drag on construction as builders hold off starting work on more houses until completed ones are sold.

“Builders are a little shaky about whether they really think demand is going to improve going forward,” said Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

“We still expect housing to turn the corner in 2007. But it’s going to be a big drag on the economy for most of the year.”

Economists had forecast that the gauge would fall to 38 from a previously reported February reading of 40, according to the median of 31 estimates in a Bloomberg News survey.

The Mortgage Bankers Assn. said March 13 that the rate of delinquencies among sub-prime borrowers was at a four-year high in the fourth quarter.

Foreclosures begun on all types of home loans rose to an all-time high.