The nation’s home builders once again showed lower confidence in the single-family home market, reflecting increasing concerns about overall housing conditions, according to the latest poll released Monday.
The index measuring builder confidence, published by the National Association of Home Builders and Wells Fargo, declined for the eighth consecutive month to a level of 30 in September. This amounted to a three-point drop from an upwardly revised 33 reading in August, and is the lowest level the index has reached since February of 1991.
“Builders are adopting an increasingly cautious attitude in their near-term outlook for new-home sales,” said NAHB Chief Economist David Seiders. “They’re experiencing falling sales, rising sales cancellations, and increasing inventories of unsold units. And although many builders are offering substantial incentives to bolster sales and limit cancellations, many potential buyers now are waiting on the sidelines to see how the market shakes out before proceeding with a home purchase.”
Seiders said the building industry is in the midst of an anticipated adjustment period as the residential real estate market subsides from record-breaking years. “Our forecast projects the numbers flattening out around the middle of next year and gradually moving back up towards trend in 2008,” he said.
However, the trade group is optimistic about the long-term, with Seiders saying long-term fundamentals will be favorable. “In fact, the housing market that emerges from this correction will have better balance between supply and demand and will be able to ride on excellent underlying fundamentals for years to come.”
Two of the three component indexes that make up the overall confidence rating declined in August. The component that gauges current single-family home sales declined five points to 32, while the component gauging expected sales in the next six months fell four points to 37. The component gauging traffic of prospective buyers remained even from last month, at 22.
The index fell in three out of four regions in September, with the largest decline in the Northeast where a six-point drop brought the index to 28. The index fell five points to 38 in the West and fell three points to 38 in the South. The index held steady at 16 in the Midwest, where fundamentally weak economic conditions continue to weigh on the market.