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Builder Confidence Dips to All-Time Low in October
Continuing problems in the mortgage market, substantial inventories of unsold homes and the perceived effect that negative media coverage is having on potential buyers combined to rattle builder confidence further this month, sending the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) to its lowest point since the series began in January 1985.
The HMI dropped two points to 18, the eighth consecutive month the measure has declined.
“Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” said NAHB President Brian Catalde.
“Consumers are still trying to sort out market realities and get the best deals they can,” noted NAHB Chief Economist David Seiders. “Many prospective buyers may very well have unrealistic expectations regarding new-home prices as well as how much they can expect to receive for their existing homes.”
“When the market is in proper balance, people can recognize a good deal when it comes along,” Seiders said. “At this point, they view a good deal as a moving target.”
The positive news from report, said Seiders, is that builder expectations for sales conditions in the next six months held steady at 26.
“Builders believe they are taking the right steps to reduce inventories and position themselves for the market recovery that lies ahead,” he said. “Indeed, NAHB’s housing forecast indicates that home sales should stabilize within the next six months and show significant improvement during the second half of next year.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. 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.
Two out of three component indexes of the HMI declined in October. The index gauging current single-family home sales and the index gauging traffic of prospective buyers each declined two points, to 18 and 15, respectively, while the index gauging sales expectations for the next six months remained unchanged at 26.
Regionally, the West accounted for a substantial portion of the decline in builder confidence this month, with a four-point reduction in its HMI to 14. The Northeast and South each reported one-point declines to 26 and 21, respectively, while the Midwest posted a two-point gain to 15.
 Attend the Fall Construction Forecast Conference in October
Plan to attend NAHB's Construction Forecast Conference on Oct. 24 at the National Housing Center in Washington, D.C. The conference brings together the nation's premier housing economists and finance experts for an in-depth examination of the economic outlook for the housing industry.
Can't attend? Watch the conference webcast live.
For more information, or to register for the conference or webcast, visit www.nahb.org/cfc.
 Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2007-2008 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables.
To learn more, visit www.HousingEconomics.com.
 Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.
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