In what may be further signs that the economic recovery is slowing, figures released on Monday show that the confidence of home builders has hit its lowest in more than a year.
The U.S. National Association of Home Builders (NAHB) said on Monday that its confidence index slipped to 14 in July, going down to its lowest level since April 2009. According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence in the housing market in July for newly built, single-family homes declined for a second consecutive month. On the NAHB/Wells Fargo HMI which is a product of NAHB Economics, a score below 50 indicates that more builders have a negative view of the housing market.
Ever since the federal buyer tax credits ended at the end of April, the modest recovery in sales seen over the past year reached a standstill in May. Since then the housing numbers have been disappointing. The weak job market as evidenced in the unemployment numbers as well as the sluggish job creation along with an ever increasing number of foreclosed properties are the main causes that have had builders go slow on construction of new homes.
“We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program’s deadline,” noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job market.
However, despite the slowing economy, the outlook for the housing market for the next six months has been found to be positive.
“This month’s lower HMI reflects a number of underlying market conditions that builders are seeing, including hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction,” said NAHB Chief Economist David Crowe. “The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy. That said, we do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year, and that new-home sales will improve by 10 percent in 2010 from 2009.”
The figures are derived from a monthly survey that NAHB has been conducting for more than 20 years. The NAHB/Wells Fargo HMI captures builder perceptions of current single-family home sales as well as sales expectations for the next six months as “good,” “fair” or “poor.” In addition, it 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 that more builders are bullish on the housing market conditions.
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