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Builder Confidence Declines In June


Snapping a string of two consecutive monthly gains, builder confidence in the market for newly built, single-family homes fell back to February levels, before the beginning of the home buyer tax credit-related surge

Snapping a string of two consecutive monthly gains, builder confidence in the market for newly built, single-family homes fell back to February levels, before the beginning of the home buyer tax credit-related surge. These findings are from the latest National Association of Home Builders/Wells Fargo Housing Market Index. The HMI dropped five points to 17 in June.

ìWe expected some softening in the market following the expiration of the home buyer tax credit and this report seems to verify this assumption,î says NAHB Chief Economist David Crowe. ìIn the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward. But as todayís HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties.î

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate 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.

Each of the HMIís component indexes recorded declines in June. The component gauging current sales conditions fell five points to 17, while the component gauging sales expectations for the next six months declined four points to 23 (from a one-point downward revised index level of 27 in May) and the component gauging traffic of prospective buyers fell two points to 14.

The HMI also posted losses in every region in June. The Northeast, which has the smallest survey sample and is therefore subject to greater month-to-month volatility, fell 17 points to 18 following a 14-point jump in May. The Midwest posted a three-point loss to 14, while the South also registered a three-point decline to 19 and the West fell four points to 15 from a revised May level of 19.