Slowing Market Sends Builder Expectations Lower
Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace have prompted single-family home builders to further adjust their perspectives on the new-home market, sending the Home Builders/Wells Fargo Housing Market Index (HMI) down four points to a reading of 42, its lowest level since April 1995.
“We now expect new-home sales to be off by 13% from the record posted in 2005,” said NAHB Chief Economist David Seiders. “Single-family starts, supported by large builder backlogs of unfilled orders and some continuing reconstruction in the wake of last year’s hurricanes, should be down by about 9% from the 2005 record.
“These forecasts naturally are subject to a considerable degree of risk,” Seiders added. “The downside risks include the potential for large numbers of sales cancellations and re-sales by the investor/speculator group as well as more aggressive tightening of monetary policy than we’re assuming in our baseline forecast.”
“Looking at today’s numbers, it’s important to keep one thing in perspective,” noted NAHB President David Pressly. “The HMI is a measure of builder sentiment — and attitudes may vary by a greater degree than actual market activity.”
Derived from a monthly survey that NAHB has been conducting for nearly 20 years, the index gauges builder perceptions of current single-family home sales and sales expectations for the next six months and traffic of prospective buyers on a seasonally adjusted basis. Any number over 50 indicates that more builders view sales conditions as good than poor.
All three component indexes declined in June: current sales fell three points to 47, sales expectations fell five points to 50 and builders’ assessment of prospective buyers dropped four points to 29.
Builder confidence slipped seven points to 40 in the Northeast, four points to 25 in the Midwest, two points to 49 in the South and one point to 61 in the West.
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Seiders Says, 'Builders Have Not Lost Touch With Demand' on the NAHB Economics Blog
NAHB Chief Economist David Seiders says that "builders have not lost touch with demand" on NAHB's economics blog, “Seiders on Housing” — an informal Internet-based forum dealing with economic issues, housing trends, survey research and other topics affecting the housing sector of the economy.
Log onto the blog at http://nahbblog.blogs.com and get direct access to Seiders' expert opinions, projections and responses. Then let Seiders know what you think by giving your perspective.