Home-Builder Confidence Slips

Posted by Orb Staff on October 19, 2009 No Comments
Categories : Residential Mortgage

Home builder confidence in the market for newly built, single-family homes slipped one point to 18 in October, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

The dip in home-builder confidence comes roughly one month before the federal $8,000 first-time home buyer tax credit is set to expire.

‘It comes as no surprise that after trending upward from a historic low in January, the HMI's positive momentum now appears to have stalled,’ says Joe Robson, chairman of the NAHB, adding that the tax credit's looming expiration, coupled with hard-to-obtain construction financing, could "derail the fragile recovery in housing just as it is starting to take shape."

David Crowe, NAHB's chief economist, argues that extending the tax credit and expanding it to beyond just first-time buyers could boost sales activity.
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"In a special questions section of our HMI survey, 85 percent of respondents said that expansion of the tax credit would have a positive impact on their sales," he says. "That would amount to a very effective stimulus to housing demand and a needed boost to the overall economy."

According to the trade group's findings, extending the tax credit by one year and expanding it to buyers who are not first-time buyers could generate 350,000 jobs; $28.2 billion in wages, salaries and business income; and $11.6 billion in additional tax revenues.

The HMI classifies 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.

In October, and for the first time since November 2008, each of the HMI's component indexes recorded declines. The component gauging current sales conditions fell one point to 17, while the component gauging sales expectations for the next six months declined two points to 27 and the component gauging traffic of prospective buyers fell three points to 14.

On a regional basis, the Northeast was the only part of the country to record an improvement in its HMI score, with a one-point gain to 25. Meanwhile, the Midwest and South each recorded one-point declines to 18, and the West recorded a four-point decline to 14.

SOURCE: National Association of Home Builders

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