New Home Construction Struggling

June 18, 2011

Builders aren’t feeling very confident these days.

According to June’s National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single-family homes fell three points to 13.

Any score over 50 means that more builders see sales conditions as good rather than poor. The last time the index was this low was in September of 2010.

“Builders are being squeezed by the continuing weakness in existing-home prices –- against which they must compete — as well as rising material costs,” said NAHB Chairman Bob Nielsen. “In addition to the ongoing impacts of distressed property sales on home prices, appraisal values and consumer confidence, rising costs for materials such as roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs.”

Each HMI component fell in June:

*The component gauging current sales conditions fell two points to 13.

*The component gauging traffic of prospective buyers fell two points 12.

*The component gauging sales expectations in the next six months fell four points to tie its record-low score of 15 set in February and March of 2009.

The Midwest dropped three points to 11 on its HMI score for June. The South fell two points to 14 and the West dropped four points to 12. Only the Northeast region posted a gain, rising two points to 17.

“Builder confidence has waned even further as economic growth has stalled, foreclosures have continued to hit the market and the cost of building a home has risen,” said NAHB Chief Economist David Crowe. “Meanwhile, potential new-home buyers are being constrained by difficulty selling their existing homes, stringent lending requirements, and general uncertainty about the economy.

“Economic growth must pick up in order for housing to gain the momentum it needs to get back on track.”

Categories: Economy, NAHB

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