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Builder confidence in the market for newly built, single-family homes declined for a second consecutive month in July to its lowest level since April of 2009, according to the NAHB/Wells Fargo Housing Market Index (HMI) released on July 19. The HMI fell two points from a downwardly revised 16 in June to 14 for July.
"We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program's deadline," noted NAHB Chairman Bob Jones. "In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets."
"This month's lower HMI reflects a number of underlying market conditions that builders are seeing, including hesitant home buyers, tight consumer credit and continuing competition from foreclosed and distressed properties that are priced below the cost of construction," said NAHB Chief Economist David Crowe.
"The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” Crowe added. “That said, we do believe that favorable factors such as low mortgage rates, affordable prices and demographic trends will help revive consumer demand for new homes this year, and that new-home sales will improve by 10% in 2010 from 2009."
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 conditions as good than poor.
All three HMI component indexes recorded declines in July, with current sales conditions falling two points to 15, expectations for the next six months edging down one point to 21 and traffic of prospective buyers dropping three points to 10.
Regionally, the HMI results were mixed in July. The Northeast, which has a smaller survey sample and therefore is prone to greater monthly volatility, posted a seven-point increase to 23, while the Midwest saw a one-point gain to 15. The South and West each declined by five points to 14 and 9, respectively.