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Builder Confidence Edges Down in June

June 17, 2008

Builder confidence in the market for newly built single-family homes edged down in June, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The index slipped to 18 this month, returning to the record low that was posted in December of 2007 (the series began in January of 1985).

The HMI was released today during a special teleconference held by NAHB. At that event, association CEO Jerry Howard pointed out the urgent need for Congress to pass targeted housing stimulus legislation amidst ongoing and severe weakness in the housing sector that is exerting a substantial drag on economic growth.

“Each week that goes by, another 15,000 workers are losing their jobs and 47,000 families are entering foreclosure. Home equity has fallen by $879 billion during the past year alone,” said Howard. “How many more Americans have to suffer before Congress will act?”

“Clearly, conditions in the housing market remain very weak, and our builder members are not seeing any signs of improvement,” noted NAHB Chief Economist David Seiders. “Indeed, the continuing erosion of employment and consumer confidence/sentiment, coupled with surging energy costs, falling house prices and rising home mortgage foreclosures, pose considerable downside risks to the economy and our housing forecast. A targeted stimulus such as a temporary home-buyer tax credit would help turn this situation around and restore housing as an engine of economic growth.”

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 either “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.

The HMI’s component indexes gauging current sales conditions and sales expectations for the next six months each remained unchanged in June, at 17 and 28, respectively. Meanwhile, the component gauging traffic of prospective buyers fell a single point to 17.

Regionally, HMI results were mixed this month, with this aspect of the index displaying characteristic month-to-month volatility. The Northeast posted a six-point decline to 12 – its lowest-ever reading since NAHB began breaking the numbers down by region in December of 2004. Meanwhile, the Midwest posted a five-point gain to 17, the South was unchanged at 22 and the West posted a four-point decline to 16. All regions are down dramatically from their respective peaks in 2005.

“Today’s numbers are a reflection of how much our members are hurting as this downturn in housing markets continues,” said NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. “Many are small-business owners who are the backbone of their local economies, and in some cases they are having to lay off family members and friends just to stay afloat. Congress can’t act too quickly to help reverse this trend.”

Source: The NAHB/Wells Fargo Housing Market Index

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