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Builder Confidence Edges Down Further In January

January 22, 2009

Concerns about the faltering economy and reluctant home buyers pushed builder confidence in the market for newly built single-family homes down further in January, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI edged down a single point to a new record low of 8 in January.

“Clearly, conditions in the nation’s housing market aren’t getting any better, and they aren’t going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market,” said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va. Speaking from NAHB’s annual convention, the International Builders’ Show being held in Las Vegas this week, Dunn noted that “The Obama Administration and the new Congress have a tremendous opportunity and responsibility to enact legislation that can spur home buyer demand and jump-start the national economy.”

Specifically, NAHB is advocating for an enhanced home buyer tax credit and a government buy-down of mortgage rates for home purchases in 2009, moves that would rejuvenate demand for homes and trigger significant consumer spending across the board.

“Builder views continue to track with historically low consumer confidence measures,” said NAHB Chief Economist David Crowe. “The fact that there has been microscopic movement in the historically low HMI and its component indexes over the last three months provides further evidence of the need for government action to rejuvenate housing demand. Qualified buyers are clearly in the wings, but they’re looking for a significant signal from the federal government that now is the time to return to the market.”

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.

All of the HMI’s component indexes remained at or near historic lows in January. The index gauging current sales conditions recorded the greatest change, with a two-point decline to 6. Meanwhile, the indexes gauging sales expectations for the next six months and traffic of prospective buyers each rose a single point, to 17 and 8, respectively.

Regionally, the HMI fell one point to 10 in the Northeast, held even at 6 in the Midwest, rose one point to 11 in the South and fell three points to new record low of 4 in the West in January.

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