The expiration of the tax credit for home buyers and sluggish economy activity continue to haunt home builders, as evidenced by the latest survey of builder sentiment.
The National Association of Home Builders Housing Market Index unexpectedly fell from 14.0 in July to 13.0 in August, reaching the lowest level since March 2009. A reading of 50 indicates builders are neither optimistic nor pessimistic.
Even with record low mortgage rates, two of the three components that make up the index, present sales and sales over the next six month, lost ground. The third component, traffic from prospective buyers, held steady at its lowest reading since March 2009, suggesting that any pick up in new building or new home sales is not likely to be forthcoming any time soon.
It's the economy stupid
“Builders are expressing the same concerns that they are hearing from consumers right now, particularly the sense that the overall economy and job market aren’t gaining any traction,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich.
“Meanwhile, many continue to report that problems with inaccurate appraisals, competition from the large number of distressed properties on the market, and tight consumer lending conditions are causing them to lose potential sales.”
Mortgages rates that are below 5% and increased affordability have failed to spark much interest in new home sales amid fears that the current economic recovery may soon fade. In the meantime, the Federal Reserve last week took new action to stimulate demand as it downgraded its outlook on the economy.
However, until the recovery picks up steam and the backlog of unsold and foreclosed homes are finally digested, builders are likely to face an uphill climb.
For more information and a look at current issues affecting the economy: Please see Tomorrow's Economy Today. Additionally, the first look at manufacturing for August is also available.
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