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Builder Confidence in Condo Market Erodes Further
Builder confidence in current condominium market conditions ended on a low note last year, according to NAHB’s Multifamily Condo Market Index (MCMI) for the fourth quarter of 2007, falling to 18.8, down nearly 11 points from the same period a year earlier.
"Given that the condo market became so overheated during the peak of the housing boom, it is not surprising that the market now continues to struggle, considering the difficulties in the mortgage sector and the fears about the economy in general," said David Seiders, NAHB's chief economist. "It is going to take time for the extra inventory to be absorbed."
The index is derived from a quarterly survey of multifamily builders and developers. On a scale of 0 to 100, a rating of 50 generally indicates an equal number of positive and negative responses.
The component of the index gauging current conditions in the condo market never rose above 25 last year.
Fourth-quarter builder expectations for the next six months were only slightly more optimistic, standing at 29.2 on the index, down from 49.1 at the end of 2006.
Responding to a series of special questions in the MCMI survey for the fourth quarter, 28% of survey respondents reported higher or somewhat higher sales cancellation rates compared to a year earlier. The average sales cancellation rate was 19% and the median was 12%.
About two-thirds of builders reported that they had lowered prices to bolster sales. The average price reduction was 11%. When asked about other marketing strategies they were using to shore up sales, more than 70% of the respondents said they were including optional items at no costs, paying closing costs or fees or absorbing financial points for their buyers.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.
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