Builder confidence in June slid to its lowest level since February 1991 as concerns about subprime mortgage lending and rising prime mortgage rates soured the outlook for recovery, according to an industry index.
The National Association of Home Builders/Wells Fargo Housing Market Index, which measures builder perceptions and expectations for home sales for the next six months, dropped to 28 this month from a reading of 30 in May. An index rating above 50 indicates that more builders view sales conditions as good, while a rating below 50 indicates that more builders view conditions as poor.
“Builders continue to report serious impacts of tighter lending standards on current home sales as well as cancellations, and they continue to trim prices and offer a variety of nonprice incentives to work down sizeable inventory positions,” said NAHB President Brian Catalde in a prepared statement.
All three component indexes declined in June, as the index gauging current single-family sales slipped two points to 29; the index gauging sales expectations for the next six months fell two points to 39; and the index gauging traffic of prospective buyers fell one point to 21.
Three out of four U.S. regions posted declines in the HMI this month, with the Midwest down three points to 19, the South off one point to 32 and the West falling five points to 27. The Northeast, however, recorded a three-point gain to 35 following a six-point loss in May.
NAHB Chief Economist David Seiders said in a statement that “home sales most likely will erode somewhat further in the months ahead, and improvements in housing starts probably will not be recorded until early next year. As a result, we expect housing to exert a drag on economic growth during the balance of 2007.”