Builder confidence in the market for newly built, single-family homes edged down for a third consecutive month in August, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI declined one point to 13, its lowest level since March of 2009.
“Builders are expressing the same concerns that they are hearing from consumers right now, particularly the sense that the overall economy and job market aren’t gaining any traction,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “Meanwhile, many continue to report that problems with inaccurate appraisals, competition from the large number of distressed properties on the market, and tight consumer lending conditions are causing them to lose potential sales.”
“Today’s report reflects single-family home builders’ concerns about current and future economic conditions and about the increasing hesitancy they are seeing among potential home buyers,” added NAHB Chief Economist David Crowe. “It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87 percent of respondents reporting that their market has been negatively impacted by foreclosures.”
Below is a chart of housing starts by region. You can see why home builders are in such a negative mood. While it may be painful for home builders, the sharp reduction in housing starts is a necessary part of any future housing recovery. The problem for the national economy is that the housing industry usually helps to lead the economy out of a recession. Not this time.
Black Swan Insights