Home Builder Confidence Tanks Amid Economic Concerns

Builder confidence in the market for newly built, single-family homes edged down for a third consecutive month in August, reaching levels not seen since March of 2009, according to a report released Monday. The latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell by one point to 13, reflecting ongoing concerns about a tepid economic recovery. Reading below 50 generally indicate pessimism about general market conditions; the index hasn’t been above 50 since early 2006. “Builders are expressing the same concerns that they are hearing from consumers right now, particularly the sense that the overall economy and job market aren’t gaining any traction,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “Meanwhile, many continue to report that problems with inaccurate appraisals, competition from the large number of distressed properties on the market, and tight consumer lending conditions are causing them to lose potential sales.” In other words, the nation’s housing crisis may not be over yet. And if anything, the nation’s bloated inventory of distressed and in-foreclosure homes is making it tough for new home sales. “Today’s report reflects single-family home builders’ concerns about current and future economic conditions and about the increasing hesitancy they are seeing among potential home buyers,” added NAHB chief economist David Crowe. “It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87 percent of respondents reporting that their market has been negatively impacted by foreclosures.” Even so, he noted, NAHB continues to project that modest job gains, historically low mortgage rates and pent-up demand will ensure a better housing market in the second half of 2010 than in the first half. It’s not a projection that is shared by most economists, with many — included famed David Shiller, of the Case/Shiller housing price index — forecasting further housing price declines in the months ahead. Two out of three of the HMI’s component indexes fell in August, the NAHB said. Three out of four regions posted HMI declines in August, as well. A six-point decline to 18 in the Northeast partially offset a big gain in that region in the previous month, while the South and West each posted one-point declines to 13 and 8, respectively. The HMI for the Midwest held even at 15 in August. Paul Jackson is the publisher of HousingWire.com and HousingWire magazine. Follow him on Twitter: @pjackson