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Builder Confidence Edges Down in May
Home builders remained considerably downbeat as market conditions continued to erode in May. The NAHB/Wells Fargo Housing Market Index (HMI), released last week, fell a point to 19 ― bringing it within one point of the record low 18 set in December 2007.
“With the HMI hovering in the historically low two-point range that’s prevailed over the past nine months, the message is very clear: The single-family housing market is still deteriorating and Congress and the Administration must move immediately to enact legislation that will help reverse the trend,” said NAHB President Sandy Dunn. “A temporary home-buyer tax credit is just the incentive that many prospective home buyers need to go forward with a purchase and help kick-start a housing and economic recovery.”
Both the House and Senate have approved bills creating a temporary home buyer tax credit of up to $7,500 for qualified buyers, but the legislation has yet to be crafted into a comprehensive bill that can be sent to President Bush for his signature.
“Despite the Federal Reserve’s concerted efforts to lower short-term interest rates, free up credit markets and shore up the national economy, the housing market has shown no evidence of improvement thus far. In fact, conditions have continued to deteriorate in recent times,” said NAHB Chief Economist David Seiders.
“The latest HMI shows that even fewer builders now foresee market conditions improving over the next six months compared with our April survey, and builder ratings of buyer traffic through model homes also have dropped off over the past month on a seasonally adjusted basis. This certainly adds fuel to the argument that targeted policy stimulus, in the form of a temporary tax credit for home buyers, is essential to halt the housing downswing and remove the heavy drag being exerted by housing on overall economic growth,” Seiders said.
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and prospective buyer traffic. 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.
The HMI’s component index gauging current sales conditions declined one point to 17 in May — its lowest level since the series began in January 1985. Meanwhile, the component gauging sales expectations for the next six months declined three points to 27, and the component gauging traffic of prospective buyers declined two points to 17.
The HMI fell in three of the four regions of the country in May, with a four-point decline to 18 registered in the Northeast, a three-point decline to 12 in the Midwest (also an all-time low) and a two-point decline to 22 posted in the South. The West saw a three-point gain to 20 this month, but that was well below the level of a year earlier.
 Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview).
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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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