Builder Confidence Remains Weak

Builder confidence in the market for newly-built single-family homes remained unchanged at a low level in November, according to a report released on Tuesday by the National Association of Home Builders (NAHB).

The NAHB/Wells Fargo Housing Market Index (HMI) remains at 17 for November - signalling that many builders see the current conditions as extremely disappointing. The index that gauges builders sales expectations for the next six months rose two points from October to 28. A reading of over 50 for either index indicates that more builders see sales conditions as good than poor.

While index readings are at an extremely depressed level, the NAHB remarks that most responses to the builder survey were received before Congress extended and expanded the home buyer credit. The $8000 first-time home buyers tax credit was extended to April 30, 2010 and also makes available up to a $6500 credit to certain qualifying buyers who are current home owners.

"When the HMI survey was conducted at the beginning of this month, home builders were facing the imminent expiration of the $8,000 first-time home buyer tax credit at the end of November, with no guarantee that this valuable buyer incentive would be extended," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "Now that Congress has done its job by both extending the tax credit into next year and expanding eligibility for it among potential buyers, we are very hopeful that this will have the intended stimulative effect on sales activity going forward."

In the NAHB survey, a third of respondents said that they have recently lost sales due to low appraisal values - up from a fourth of respondents who indicated lost sales in July.

NAHB said, "Builders report that low appraisal values are often tied to the use of foreclosed and distressed properties as "comps" in the appraisal process."

"Today's report confirms that home builders and buyers were in something of a holding pattern in early November as the anticipated expiration of the tax credit drew near and congressional action had not yet taken place to address this," confirmed NAHB Chief Economist David Crowe. "Meanwhile, the challenges that builders are facing in obtaining credit for new housing production and appropriate appraisal values for their homes continued to worsen. These issues still present a very worrisome problem that is weighing down prospects for a sustained housing market recovery."

Regionally for November's HMI reading, the South remained steady at the previous month's reading of 17, the Midwest declined three points to 14, the Northeast declined six points to 19, and the West recovered five points to 19 after October's big dip.



Source:
National Association of Home Builders