Ongoing concerns about the subprime lending market and a surplus of unsold homes have led to reports of lower builder confidence, according to the National Association of Home Builders (NAHB).
According to the NAHB/Wells Fargo Housing Market Index, confidence declined four points to 24, the index’s lowest level since January 1991. Scores from three component indexes are used to calculate the seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.
“The bottom line is that the single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003 to 2005 period,” said NAHB chief economist David Seiders. “Builders are actively trimming prices and offering buyer incentives to work down their inventories, but meanwhile there is a large supply of vacant existing homes on the market, and affordability problems persist despite efforts to attract buyers.
All four regions of the country reported declines in the index in July. The Northeast and South each saw five-point declines, to 31 and 26, respectively, while the Midwest slipped a single point to 19 and the West declined three points to 25.