Home builders’ confidence in the housing market continues to fluctuate, with the NAHB/Wells Fargo housing market index (HMI) dipping two points in March to a reading of 15, according to data released Monday.

“The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time,” said NAHB Chief Economist David Crowe.

Buyer confidence is similarly wobbly. Builders responding to the NAHB’s monthly survey reported worsening conditions current sales (a reading of 15) their sales expectations for the next six months (a reading of 24), and most troublingly, their current buyer traffic. According to the HMI, the index component assessing prospective buyer traffic decreased by two points to a level of 10.

Historically, the buyer traffic piece of the index registers a 40 in March; the all-time low is 7, according to research provided by David I. Goldberg, an analyst at UBS Investment Bank in New York. “We don't expect an improvement until unemployment peaks and the economy shows signs of stabilization, leading to improved buyer confidence,” he said in a research note.

The wild card in this market remains the federal housing tax credit, which requires a signed contract by April 30 and settlement by June 30, 2010. Many industry watchers expect the index to rise this spring, drop after the tax credit expires, and then level out as the economy and housing alike find steady ground. But recent weaknesses in new and existing home sales have been unexpected.

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