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Builder confidence declines in June

NAHB chief economist David Crowe also expected some softening in the market.
Sticks go up in New Jersey.

(Jun. 15) Builder confidence in the market for newly built, single-family homes dropped five points in June to 17, according to the latest National Association of Home Builders (NAHB)/Wells Fargo House Market Index (HMI).

The June figure brings the index back to February levels before the beginning of the home buyer tax credit surge.

"The home buyer tax credit did its job in stoking spring sales, and we expected a temporary pullback in the builders' outlook after the credit expired at the end of April," said NAHB chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels."

NAHB chief economist David Crowe also expected some softening in the market. "In the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward. But as today's 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."

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 as "good," "fair" or "poor." The survey also asked builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." 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 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.


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