Builder confidence edged down slightly in April as supply places a strain on builders, however confidence in the future remains on solid ground as homebuyer demand continues to surge, according to the latest Housing Market Index from the National Association of Home Builders and Wells Fargo.

Builder confidence decreased one point to 69 in April, the HMI showed. This marks the fourth consecutive month of decreases as it fell one point in March to 70, dropping from February’s downwardly revised reading, which was previously set at a post-recession high of 72.

“Strong demand for housing is keeping builders optimistic about future market conditions,” NAHB Chairman Randy Noel said. “However, builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs. Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as good, fair or poor.

The survey also asks builders to rate traffic of prospective buyers as high to very high, average or low to very low. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.

The HMI index which measures buyer traffic remained the same at 51, while the part measuring sales expectations over the next six months fell one point to 77. The component which loos at current sales conditions dropped two points to 75.

“Ongoing employment gains, rising wages and favorable demographics should spur demand for single-family homes in the months ahead,” NAHB Chief Economist Robert Dietz said. “The minor dip in builder confidence this month is likely due to winter weather effects, which may be slowing housing activity in some pockets of the country.”

“As we head into the spring home buying season, we can expect the market to continue to make gains at a gradual pace,” Dietz said.

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