HMI reports builder confidence unchanged in 3rd straight month

Real Estate Weekly,  Jan 2, 2008  

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Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in December as problems in the mortgage market and excess inventory issues continued, according to the latest NAHB/ Wells Fargo Housing Market Index (HMI). The HMI held even at 19 this month, its lowest reading since the series began in January 1985.

"Builders continue to look for signs of improvement in the ongoing mortgage market crisis that is weighing on housing and the overall economy," said NAHB president Brian Catalde, a home builder from El Segundo, Calif. "Recent actions taken by Congress and the Administration addressing certain aspects of the problem are definitely a step in the right direction."

"Today's report shows that builders' views of housing market conditions haven't changed in the past several months, and there clearly are signs of stabilization in the HMI," noted NAHB chief conomist David Seiders. "At this point, many builders are bracing themselves for the winter months when home buying traditionally slows, scaling down their inventories and repositioning themselves for the time when market conditions can support an upswing in building activity--most likely by the second half of 2008."

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 either "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.

In December, the index gauging current sales conditions for single-family homes improved by a single point, to 19, and the index gauging sales expectations for the next six months rose two points to 26. Meanwhile, the index gauging traffic of prospective buyers declined three points to 14.

Regionally, the HMI results were mixed in December. The Midwest and South each posted two-point gains in their HMI readings, to 15 and 21, respectively. The West held even at 18, and the Northeast, which experienced wetter weather conditions than normal in the survey period, posted a seven-point decline to 19. All regions were down on a year-over-year basis.

Catalde applauded the Senate's recent approval of two vitally important pieces of legislation, including one bill on Federal Housing Administration reform and another addressing the tax burden on struggling home owners when banks forgive a portion of their mortgage debt as part of a loan workout.

"Congress must now move quickly to achieve final enactment of these bills into law as well as key legislation to accomplish oversight reform for Fannie Mac and Freddie Mac," he said. "Together with the Bush Administration's recently announced plan to freeze rates on certain adjustable-rate subprime mortgages, these are essential measures for improving credit liquidity, restoring consumer confidence, and reviving the overall housing market and economy."

The National Association of Home Builders is a Washington-based trade association representing more than 235,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction.

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