The National Association of Home Builders/Wells Fargo Housing Market Index, released earlier this week, showed that builder confidence in the market for new, single-family homes is holding steady at a low level of 15.
"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," says Bob Nielsen, chairman of NAHB and a home builder in Reno, Nev. He noted that 41% of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.
"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," says NAHB Chief Economist David Crowe. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."
The market index is derived from a monthly survey and gauges builder perceptions of current single-family home sales and sales expectations for the next six months. Scores from each survey component are used to calculate a seasonally adjusted index. Any number more than 50 indicates more builders perceive conditions as good. Two out of three of the HMI’s component indexes posted marginal gains in August. Current sales conditions saw a one point jump, as did gauging traffic. The component gauging sales expectations declined two points.
HMI tables can be viewed at nahb.org/hmi. More housing statistics are available at housing economics.com.