Builder confidence in the housing market
remained unchanged in August according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday. While two of the three indices that make up
the HMI improved, the index measuring the future prospects for new homes offset
those gains.
The HMI is derived from a monthly survey
of new home builders which asks them to assess both current new home sales and
their expectations for sales in six months as "good," "fair," or "poor." Builders are also asked to rate the traffic
of prospective buyers as "high to very high," "average" or "low to very low." Any score of 50 or more on the three
components or on the composite HMI indicates that more builders view conditions
as good than view them as poor.
The component gauging current sales conditions gained one point to 16 - its
highest level since March of this year - and the component gauging traffic of
prospect buyers rose one point to 13 following two consecutive months at 12.
However, the component gauging sales expectations for the next six months
declined two points to 19. This followed
a six-point gain in July...
Bob Nelson, chairman of NAHB said that
41 percent of the builders responding to a special questions section of the HMI
indicated they had lost sales contracts due to buyers' inability to sell their
current homes. This follows a report last
month from the National Association of Realtors (NAR) on existing home sales. In that report Lawrence Yun, NAR chief
economist, said that 16 percent of the associations members reported a sales
contract was cancelled in June, four times the cancellation rate in May. NAR said those cancellations were the result
of tight credit and appraisal problems.
Perhaps we are seeing a domino effect with underwriting issues that
cancel one type of sale leading to the collapse of new home sales contracts.
"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."
The survey results were mixed on a regional basis. While the Northeast posted a four-point gain
to 19, the West registered a one-point gain to 15, the South held even at 17
and the Midwest posted a two-point decline, to 10.