Builder Confidence at Record Low in December: Report

Builder confidence in the market for new single-family homes held at a record low in December amid deepening economic turmoil and massive reductions, according to the monthly National Association of Home Builders. The December NAHB/Wells Fargo Housing Market Index (HMI), released monday, held at November’s all-time low reading of 9. “The crisis continues,” said NAHB chairman and Point Pleasant-based home builder Sandy Dunn. “While builders are doing everything we can in the way of price and non-price incentives to move new homes off the books, buyers are afraid to move forward, and in any case there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures. Congress and the Administration must step in with substantial incentives to bring qualified buyers back to the table as well as effective foreclosure relief programs if we are to end this negative spiral that is weighing so heavily on our national economy.” Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. Two out of three of the HMI’s component indexes registered some further deterioration in December, according to the NAHB’s data. The index gauging current sales conditions and the index gauging sales expectations for the next six months each declined to new record lows, falling one point to 8 and two points to 16, respectively. The index gauging traffic of prospective buyers held at a record low of 7 for the month. Two out of four regions posted declining builder confidence readings in December, with the Midwest and South edging down one point and two points, to 6 and 10, respectively. The Northeast held even with the previous month’s 11 reading, while the West posted a one-point gain to 7, the NAHB reported. “We have seen no improvement over the past month in terms of sales conditions for new homes,” said NAHB chief economist David Crowe. “In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence.” The U.S. Labor Department in early December reported the nationwide unemployment rate reached an astounding 6.7 percent in November, shedding 533,000 nonfarm jobs — the 11th straight monthly decline and the largest since December of 1974. The employment services industry was severely hit, losing 101,000 jobs over the course of the month, as was retail trade, posting 91,000 job losses. Financial services cut 34,000 jobs. And not surprisingly, fewer than a third of industries were hiring in November. Write to Diana Golobay at [email protected].