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Though Upbeat, Builders Add Katrina to List of Worries
Home builders polled earlier this month remained optimistic about prospects for the new single-family housing market in the aftermath of Hurricane Katrina, but confidence continued to shift slightly downward from a cyclical high point in June, not just for reasons associated with the storm, according to the NAHB/Wells Fargo Housing Market Index (HMI), which was released on Sept. 19.
“Many builders appear to be adopting a more cautious attitude because of uncertainties in the economy and this post-Katrina environment, particularly with regard to sales expectations in the near term,” observed NAHB President Dave Wilson.
The overall HMI declined two points in September to a score of 65, its lowest level since July of 2003 when it also registered a 65. This was the third consecutive monthly decline from a June reading of 72.
“As expected, the housing market is beginning to show signs of cooling and builders are reacting to that,” said NAHB Chief Economist David Seiders. “While the HMI survey was taken immediately following Hurricane Katrina in early September, a combination of factors is likely in play, and Katrina impacts are only one part of the equation. In fact, the current HMI does not include responses from Katrina-hit areas, which typically account for about 2% of survey responses.”
“In general, concerns about rising interest rates down the line, some buyer resistance to the strong house-price appreciation we’ve seen for several years, higher gas prices — which not only drive up the cost of doing business but also cause some people to rethink their decision to live in further-out communities — and other factors such as lot shortages and high impact fees for development, are all taking a bite out of builder optimism looking forward,” Seiders said.
Derived from a monthly survey that NAHB has been conducting for some 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. Any number over 50 indicates that more builders view sales conditions as good than poor.
The builders’ assessment of current sales traffic declined one point to 72 this month, and prospective buyer traffic was down three points to 47. The component gauging sales expectations for the next six months was off more substantially, falling eight points, to 69. The decline in confidence appeared to be fairly consistent across all four regions of the country.
“Keep in mind that builder confidence is still well above the break-even point of 50 on the HMI, and more respondents are reporting good conditions than bad in their markets,” noted Seiders. “Even so, today’s results show that builders are cognizant of the anticipated signs of slowing housing activity in certain areas.”
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