Despite continued record-low confidence in the housing market, the National Association of Home Builders say, “There’s still a bright side to the news.” Anticipating positive lift from the newly enacted housing-stimulus package, single-family home builders registered some improvement in their outlook for home sales in the next six months, according to the trade group’s most recent NAHB/Wells Fargo Housing Market Index (HMI).
Builders have been drastically cutting inventory to offset weak demand and a glut of unsold homes. The U.S. Commerce Department reported Tuesday that new housing starts in July fell 11 percent to 965,000 — the lowest annual rate in more than 17 years. And building permits, an indicator of future construction, tumbled 17.7 percent last month to an annual rate of 937,000 — the biggest plunge since February 1990.
Record low
The HMI remained at 16 in August, the same as the record low level it reached in July. Any reading below 50 means there are more builders who see conditions as poor than those who see conditions as good, and 16 is the lowest the index has been since it started in 1985.
While the headline index was unchanged, two of the three component indexes saw modest gains in August. The index measuring current sales conditions rose one point to 16, and the index gauging sales expectations for the next six months rose two points to 25. The index measuring traffic of prospective home buyers was unchanged at 12.
Regionally, the Northeast and Midwest each posted gains in builder confidence, with the Northeast up two points to 16 and the Midwest up four points to 14. Meanwhile, the South remained unchanged at 20, and the West, whose new-homes market has been heavily impacted by an upswing in foreclosure sales at cut-rate prices, posted a decline of three points to 11.
“While our overall measure of builder confidence remains at a record low at this time, it is a good sign that two out of three of the HMI’s component indexes rose in August, and this may be an indication that we are nearing the bottom of the long downswing in new-home sales,” said NAHB Chief Economist David Seiders in a press release. “Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond.”
Housing stimulus boost
Confidence may not appear to be improving as quickly as most builders would like to see it, but NAHB President Sandy Dunn, said in a recent press release that “the actions that home builders are taking right now to keep a lid on new production are slowly but surely helping to bring supply and demand back into balance and put us on the road to a much healthier housing market.”
In addition to lowering the inventory stock, Dunn says the housing-stimulus legislation will play a significant role in encouraging home buyers back to the market.
The Housing and Economic Recovery Act of 2008, signed into law by President Bush on July 30, implemented several critical reforms to the housing finance system, provided aid to troubled homeowners facing foreclosure and created a temporary $7,500 tax credit for first-time home buyers who meet certain income requirements. NAHB has developed a Web site at www.federalhousingtaxcredit.com to promote the tax credit and answer commonly asked questions about it.
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