Subprime Loan Uncertainties Erode Confidence of Builders
Builder confidence in the market for new single-family homes has receded this month, largely on concerns about deepening problems in the subprime mortgage arena, according to the NAHB/Wells Fargo Housing Market Index (HMI), which was released on March 19.
After rising fairly steadily since its recent low last September, the HMI declined three points from a downwardly revised 39 reading in February to 36 in March.
“Builders are uncertain about the consequences of tightening mortgage lending standards for their home sales down the line, and some are already seeing effects of the subprime shakeout on current sales activity,” said NAHB Chief Economist David Seiders. “The fundamentals of today’s housing market still are relatively strong, including a favorable interest-rate structure, solid growth in employment and household income, lower energy prices and improving affordability in much of the single-family market — due in part to price cuts and non-price sales incentives offered by builders. NAHB continues to forecast modest improvements in home sales during the balance of 2007, although the problems in the mortgage market increase the degree of uncertainty surrounding our baseline (i.e., most probable) forecast.”
Derived from a monthly survey that NAHB has been conducting for 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and traffic of prospective buyers. Scores for each component are used to calculate a seasonally adjusted index; any number over 50 indicates that more builders view sales conditions as good than poor.
All three components of the index registered declines in March after having risen in the previous month. The index gauging current single-family home sales and the index gauging sales expectations for the next six months each declined three points, to 37 and 50, respectively. Meanwhile, the index gauging traffic of prospective buyers declined a single point, to 28.
Regionally, the HMI results were somewhat mixed. In the Midwest and West, the index gained one point, rising to 28 and 36, respectively. In the Northeast, the HMI declined two points to 41, and in the South, it fell four points to 40.
Is the Housing Correction Over? Attend Construction Forecast Conference
Will housing demand outweigh affordability hurdles, inventory overhangs and the retreat of investors? Where are home prices headed?
Get the answer to these and other questions at the Construction Forecast Conference — Spring 2007 on April 26 in Washington, D.C.
Panels of nationally recognized experts will discuss economic trends, government policies, developments in the housing industry and the results from NAHB's recent surveys at the day-long conference.
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