Aug
15

Builder Sentiment Lays Flat

August 15, 2011

At least it didn’t go down.

Builder confidence in the market for newly built, single-family homes remained unchanged at 15 for the month of August, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The index has been below 20 every month but one over the past two years.

A score over 50 means that more builders see market conditions as good than poor. The HMI hasn’t seen 50 since April of 2006, during a much more lucrative time for the housing industry.

row of town homes nearing completionThe buying conditions are even better today than they were in 2006, but the selling conditions are not. According to this month’s HMI, 41 percent of respondents had lost sales contracts due to the fact that the buyers’ couldn’t sell their current homes.

“Builders continue to confront the same major challenges they have seen over the past year,” said NAHB chairman Bob Nielsen, “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.”

Two of the three HMI component indexes posted small gains in August:

*Current sales conditions: This component rose one point to 16 to post its highest level since March.

*Traffic of prospect buyers: This component also increased one point to 13 after two straight months at 12.

*Sales expectations for the next six months: Unfortunately, this component declined two points to 19.

The results were mixed regionally as well:

*Northeast: Increased four points to 19.

*West: Posted a one-point gain to 15.

*South: Remained unchanged at 17.

*Midwest: Declined two posts to 10. Awful.

“The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time,” said 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.”

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