Builder Expectations Reflect Slowing Market
The nation’s single-family home builders continued this month to adjust their expectations for the housing market in light of rising mortgage rates, deepening affordability issues and the retreat of investors and speculators, sending the NAHB/Wells Fargo Housing Market Index (HMI) down six points, to a reading of 45, its lowest level since mid-1995.
“Based on historical experience, particularly the 1994-1995 episode, the pattern of movement in the HMI is not inconsistent with the orderly cooling-down process we’re projecting for home sales and single-family housing starts in 2006,” said NAHB Chief Economist David Seiders. “We expect new-home sales to be off by 12% from the record posted in 2005. Single-family starts, supported by large builder backlogs of unfilled orders and reconstruction in the wake of last year’s record-breaking hurricane season, should be down by about 7% from the 2005 record.”
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, 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 components of the index declined in May: current sales and sales expectations for the next six months each fell five points, to 50 and 54, respectively; and builders’ assessment of prospective buyer traffic dropped seven points, to 32.
Builder confidence eroded three points to 47 in the Northeast, two points to 30 in the Midwest, six points to 51 in the South and eight points 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.