Builder Confidence Remains in Basement

The Housing Market Index (HMI) release today by the National Association of Home Builders (NAHB)/Wells Fargo remained virtually unchanged for the sixth month in a row.  The index which measures home builders' confidence in the market for newly built, single-family houses, slid by a single point in September to 14.  It has moved within the 13 to 16 point range since mid-winter.

The HMI is derived from a monthly survey of new home builders which asks them to assess both current new home sales and their expectations for sales in six months as "good," "fair," or "poor."  Builders are also asked to rate the traffic of prospective buyers as "high to very high," "average" or "low to very low."  Any score of 50 or more on the three components or on the composite HMI indicates that more builders view conditions as good than view them as poor.

Answers given to all three questions resulted in lower scores. The component measuring current sales conditions decreased from 15 to 14 while attitudes about sales expectations for the next six months drove that component down two points to 17.  The measure of traffic of prospective buyers was 11, a loss of two points since August. 

"Very little has changed in terms of housing market conditions so far this year," said NAHB Chairman Bob Nielsen. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit."

"The fact that the HMI continues to hover within such a narrow, low range reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate," added NAHB Chief Economist David Crowe.  "While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market."

Regional results echoed the national attitude; only in the Midwest, where the index rose one point to 11, showed positive movement.  The Northeast and South each declined two points to 15 and the West lost three points to score 12.