|
Credit Tightening Weighs on Builder Confidence in August
Highly visible problems in the housing finance system are contributing to a wait-and-see attitude among prospective home buyers and reducing builder confidence in the single-family housing market, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), which was released on Aug. 15. The index for August declined two points to 22, its lowest level since January 1991.
“Builders realize that issues related to mortgage credit cost and availability have become more acute, filtering some prospective buyers out of the market and prompting others to delay their decision to purchase a new home,” said NAHB President Brian Catalde.
“Builders are responding by trimming prices and stepping up non-price incentives to bolster sales and limit cancellations, although we’re dealing in a difficult market environment.”
“There is no question that problems in the subprime mortgage sector have spilled over to other components of housing finance, including the Alt-A and jumbo markets, delaying a revival of the single-family housing market,” added NAHB Chief Economist David Seiders. “However, the government-related parts of the mortgage market still are functioning well and the underlying economic fundamentals promise to remain solid for some time — providing support to the longer-run housing outlook. We now expect to see home sales return to an upward path by early next year and we expect housing starts to begin a gradual recovery process by mid-2008. From there, the market will have plenty of room to grow in 2009 and beyond.”
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.
All three component indexes declined in August. The index gauging current single-family home sales fell a single point, to 23; sales expectations declined two points to 32; and prospective buyer traffic was down three points, to 16.
Builder confidence this month wilted in three of the four regions of the country. It was down five points, to 14, in the Midwest; off one point in the West, at 23; and down two points in the Northeast, to 30. Confidence registered 25 in the South, unchanged from the prior month.
|
