Builders continue to be skeptical about the near term prospects of the real estate market according to details from the December National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Tuesday.

The overall Index which shows builders perception of the market was 16, one point lower than in November and the lowest point since June. Any score over 50 indicates that more builders view market as good rather than poor, a condition that hasn't existed in several years.

The HMI is constructed from replies to three questions posed to builders.  Each respondent is asked to rate both his current perceptions of the market and his expectations for the market in six months on a scale consisting of "good," "fair," or "poor" responses.  Each is also asked to rate prospective buyer traffic as "high to very high," "average" or "low to very low."  In addition to the composite score a score is given for each of the three components. NAHB has conducted this survey every month for over 20 years.

Two out of the three component scores were also down.  Current sales conditions were scored at 16, a one point decline since November while expectations for sales in six months was 26, down two points.  Current traffic was rated at 13 for the third consecutive month. 

 "From an affordability standpoint, rarely has there been a better time in history to purchase a home, thanks to record low interest rates, attractive prices, and of course the recent extension and expansion of the home buyer tax credit," said Joe Robson, Chairman of NAHB and a home builder from Tulsa, Oklahoma. "However, builders are not seeing the full impact of these conditions on buyer demand, partly because awareness of the latest incentives is still building, and partly because of concerns about job security and other economic woes."

"As we anticipated, this is shaping up to be a bumpy recovery period for the housing market,"   noted NAHB Chief Economist David Crowe. "While some families may be just starting to factor the expanded tax credit into their potential home buying plans, many are hesitating because of the poor economy. At the same time, tight lending conditions for both consumers and home builders continue to pose considerable obstacles on the road to a sustained housing and economic recovery."

Builders had a brighter outlook in the Northeast region where the HMI gained three points to score 23.  The West was up one point to 19.  Builders in the Midwest took the dimmest view of their prospects - the index declined two points to 12.  The South was unchanged at 17.

Here is a table summarizing the results...