There is an old Western expression that a person's mood is "lower
than a snake's belly." Well lift up that snake and you just might
find a home builder under it.
The National Association of Home Builders (NAHB) released
the results of its monthly survey of builder confidence on
this week and found that confidence even more shaken by continued problems in
the mortgage industry than it was in September. Continuing high inventories
of unsold homes and what is perceived of as generally negative media coverage
of the housing situation is also leaving builders increasingly less hopeful
about a short-term recovery in the housing market.
The report stressed that, while builders are reporting that their sales
incentives are attracting interest, "many potential buyers are either
holding out for even better deals or hesitating due to concerns about negative
and confusing media reports on home values.
NAHB Chief Economist David Seiders said, "Consumers are still trying to sort
out market realities and get the best deals they can. Many prospective buyers
may very well have unrealistic expectations
prices as well as how much they can expect to receive for their existing homes.
When the market is in proper balance, people can recognize a good deal when
it comes along; at this point, they view a good deal as a moving target."
NAHB in cooperation with Wells Fargo has been conducting the survey upon which
the Housing Market Index (HMI) is based for 20 years. Builders
are asked to rank the housing market on three criteria - current single family
home sales and sales expectations for the next six months each of which are
evaluated as good, fair, or poor, and current buyer traffic which is rated from
very low to very high. For each of the three components any score over 50 indicates
a good degree of builder confidence as does such a score for a composite of
The overall HMI for October was 18. This was two points below the September
HMI and the lowest recorded since the survey began in 1985.
The index gauging current single family home sales also declined 2 points to
The positive news from today's report, said Seiders, is that
builder expectations for sales conditions in the next six months held steady
at 26. "Builders believe they are taking the right steps to reduce inventories
and position themselves for the market recovery that lies ahead," he said. "Indeed,
NAHB's housing forecast indicates that home sales should stabilize within the
next six months and show significant improvement during the second half of next
The NAHB survey, however, was conducted well before today's report from
the Census Bureau and the Department of Housing and Urban Development on housing
starts and permits issued during the month of September. The report sent Wall
Street into a temporary tailspin.
Housing starts in the month of September were at a seasonally
adjusted annual rate of 1.191,000 units, a 10.2 percent decline from the revised
August figure of 1,327,000 and 30.8 percent fewer starts than the 1.721,000
starts in September 2006. However, single family housing starts were only 1.7
percent below the August figure; it was the initiation of projects with five
or more units that slipped drastically, down 36 percent since the previous month.
This was the lowest rate of new construction activity since March 1993.
Starts in the Northeast Region, however, were up a remarkable 45.4 percent
in September while the other three regions were in the negative double digits.
Builders pulled permits to build 1,226,000 units in September, 7.3 percent
fewer permits than were issued in August and 25.9 percent fewer than in September
2006 when an estimated 1,654,000 permits were issued.
Builders are sitting on an estimated 1,874,000 permits for which construction
has not yet begun but this is a 4.2 percent decline from the August number and
is 8.6 percent lower than the figure one year ago.