Builder Confidence Declines Further in July

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RISMEDIA, July 18, 2008-Builder confidence in the market for newly built single-family homes fell for a third consecutive month in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI fell below its previous record low of 18 in June to a new record low of 16 in July, with each of its three component indexes also hitting record lows.

“The worsening housing slump and the near-meltdown in financial markets last week makes it even more urgent for Congress to complete action on the housing bill now, a move that will help stabilize and restore confidence in housing and the U.S. economy,” said NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va.

A housing stimulus bill now being considered in Congress would provide a temporary tax credit of up to $8,000 for first-time home buyers, helping to stimulate sales, reduce the inventory of unsold homes on the market, stabilize house prices and arrest the rapid deterioration of mortgage credit quality.

“Builders are reporting that traffic of prospective buyers has fallen off substantially in recent months,” said NAHB Chief Economist David Seiders. “Given the systematic deterioration of job markets, rising energy costs and sinking home values aggravated by the rising tide of foreclosures, many prospective buyers have simply returned to the sidelines until conditions improve,” he said. “An $8,000 tax credit, made available for a limited time, could be just the incentive needed to draw them into the game, and a policy-induced pickup in home sales could gain momentum further down the line.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also 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 view sales conditions as good than poor.

Each of the HMI’s component indexes fell to new record lows in July. The index gauging current sales conditions declined one point to 16, the index gauging sales expectations in the next months fell four points to 23, and the index gauging traffic of prospective buyers also receded four points, to 12.

All but one region showed declines in builder confidence in July. The Midwest declined six points to 10, its lowest HMI score since the regional detail was introduced in December of 2004, while the West matched a record low set in January 2008 with its three-point decline to 13. The South posted a one-point decline to 20. The Northeast was the only region to post a gain in July’s HMI, rising two points to 14 from the previous month’s record low of 12.

For more information, visit www.nahb.org/hmi.

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