Homebuilders are feeling a little less confident this month.

A key measure of builder confidence declined this month, with the Housing Market Index (HMI) dropping two points to a level of 53.

Released monthly by the NAHB, the HMI tracks homebuilder sentiment in the market for newly built, single-family homes; although any measure above 50 indicates that more builders see market conditions as good than as bad, March’s reading of 53 represents the lowest level for the HMI in eight months.

“Supply Chain Issues” to Blame?

In comments accompanying the report, NAHB personnel struck positive tones about the HMI’s future.

Tom Woods, the association’s chairman, portrayed the decline as nothing more than a blip.

“Even with this slight slip,” Woods said, “the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season.”

David Crowe, the NAHB’s chief economist, emphasized that supply chains were to blame for March’s disappointing performance.

“The drop in builder confidence is largely attributable to supply chain issues, such as lot and labor shortages,” 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.”

HMI Still Out of Touch with Reality

Of course, there is one giant issue that both Woods and Crowe did not touch upon in their comments – the fact that the HMI remains significantly out of step with the actual rate of single-family home construction.

Here’s a graph we construction to spotlight the divide:

As you can see, even with March’s decline, the measure of builder confidence remains far above the rate of single-family housing starts; indeed, the HMI may have fallen 3.6 percent from February to March, but single-family starts fell 12.53 percent by their latest measure.

How do we explain such a divide? As we detailed extensively last month, an HMI of 53 still means that 47 percent of builders are not happy with the current market, and the only reason the aforementioned 53 are confident is because they’ve adapted with the marketplace. New construction (like the rest of the housing market) has shifted towards affluence, and higher-priced listings have surged in stunning fashion – not only has the median sales price for new homes risen 28.3 percent from 10 years ago, but also, in 2014, there were more new home sales priced $400,000 and above than $200,000 and below.

So simply, with incomes stagnant and savings low, certain builders have shifted their business to accommodate the only consumers who can purchase homes nowadays – the affluent classes. For the builders who made that shift, times are good and confidence is strong; for those who didn’t, times are still a bit difficult and confidence is lagging.

How long will that business model hold out? We shall see!