The tax-credit hangover hit builders this month.

After April’s frenzy of last-minute contract signing, the new-home sales situation has slowed considerably, based on data released Tuesday by the NAHB. According to the NAHB-Wells Fargo Housing Market Index (HMI), builders’ overall confidence in the housing market dropped five points to a reading of 17 in June, below industry watchers’ expectations.

“The home buyer tax credit did its job in stoking spring sales, and we expected a temporary pullback in the builders’ outlook after the credit expired at the end of April,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels.”

All three components of the index slipped in June, with current sales conditions also recording a five-point drop to a 17 reading. Traffic slipped two points to 14, and sales expectations for the next six months declined four points to a reading of 23. 

Today’s data points to the ongoing unpredictability of the housing recovery, which regularly seems to lose ground almost as soon as it gains it. “Results in the first half of the year have been increasingly inconsistent, with various data points suggesting that conditions are better or worse than expected,” noted David I. Goldberg, an analyst with UBS Investment Bank in New York City. “We anticipate continued uncertainty over the next few months, reflecting the further impact of the expiration of the tax credit. This should ease, however, toward the end of the year as signs of stabilization—and a gradual recovery—become more evident.”

David Crowe, NAHB’s chief economist, agreed--somewhat. “In the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward,” he said. “But as today’s HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices, and competition from short sales and foreclosed properties.”

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: New York, NY.