Builder confidence, which had rebounded earlier in the year on hopes that a downturn in the housing market would not be prolonged or pronounced, continues to slide on concerns about problems in subprime mortgage lending.
The National Association of Home Builders/Wells Fargo Housing Market Index, a monthly survey gauging builders’ expectations for the next six months, shows a level of pessimism not seen since September 2006.
This month’s index of 30 is down from 33 last month and a recent high of 39 in February. The index can range from 0 to 100, with a score over 50 indicating more builders view sales conditions as good than poor.
The survey asks builders about their perceptions of current and future single-family home sales, asking them to rate them as “good,” “fair” or “poor.” Builders are also asked 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.