Builder Confidence Remains Low
Since the conclusion of the new homebuyer tax credit, economic indicators for residential construction have been dropping. One area that continues to remain low in July—in fact reached its lowest level since April 2009—is builder confidence in new, single-family homes.
According to the NAHB (National Assn. of Home Builders), www.nahb.org, Washington, D.C., the overall HMI (Housing Market Index) dropped two points from June to July, reaching a level of 14.
The HMI collects builder perceptions on existing sales and expected sales of new single-family homes for the next six-month period. Based on a scale of 0 to 100, a rating of 50 indicates the number of positive responses equals negative responses.
In July, the component measuring current sales conditions fell to 15, down two points from June. The metric gauging sales expectations in the coming six months dipped one point from 22 in June to 21 in July. Finally, the area determining traffic of prospective buyers dropped three points from June to July, reaching a level of 10.
According to Bob Jones, chairman, NAHB, this lull in homebuyer activity follows the expiration of the tax credit, as many of those sales would have occurred this summer.
David Crowe, chief economist, NAHB, adds, “This month’s lower HMI reflects a number of underlying market conditions that builders are seeing, including hesitant homebuyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction.”
Crowe also adds this pause in sales after the tax credit appears to be longer than anticipated, but believes other factors will help improve demand for new homes this year.
Regionally, the HMI increased seven points in the Northeast in July, reaching 23. Although, NAHB notes the Northeast has a smaller survey sample, which makes this region prone to greater volatility. In the Midwest, builder confidence saw a one-point increase to 15, while both the South and West decreased five points to 14 and 9, respectively.
While there was a bit of hope early this year that economic conditions in residential construction were beginning to improve, the HMI in July shows builder confidence still remains relatively low.