NAHB, a trade association representing contractors and professionals in all aspects of home, multifamily and light commercial construction, polls homebuilders each month for their take on the housing market. NAHB officials blamed April's drop on weakening job markets and lower consumer confidence.

"With long-term mortgage rates hovering around 7%, the financing climate for home purchases remains very good," says NAHB president Bruce Smith, a home builder from Walnut Creek, CA. "However, recent signs of continued weakening in the broader economy--including higher unemployment figures and the University of Michigan's report showing lower consumer sentiment for early April--have likely played a role in builders lowering their assessments of current home sales and expected sales in the next six months."

The index has been compiled monthly for the past two decades. Builders are asked to rate current sales, projected sales for the next six months and traffic of prospective clients. Two out of three of the HMI's component indexes declined in April. The index for current single-family home sales and the index gauging expected sales in the next six months each dropped four points, while the index gauging traffic of prospective buyers rose three points.

"While significant strength remains in the overall housing market," says Smith, "builders are perceiving a bit more hesitancy among potential buyers. People are out there looking, but some are less likely to commit in the face of current economic conditions."