Builder confidence in the market for new single-family homes fell to a 22-year low in October as weak home sales and mortgage credit problems continued to dissuade potential buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.
The HMI dropped two points this month to 18 — its lowest point since the series began in January 1985 — and has now fallen in each of the past eight months, according to NAHB. A number over 50 indicates more builders see sales conditions as good than poor.
“Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” said NAHB President Brian Catalde in a statement.
Two out of three component indexes of the HMI declined in October. The index gauging current single-family home sales and the index gauging traffic of prospective buyers each declined two points, to 18 and 15, respectively, while the index gauging sales expectations for the next six months held at 26.
Regionally, the West accounted for a substantial portion of the decline in builder confidence this month, with a four-point reduction in its HMI to 14. The Northeast and South each reported one-point declines to 26 and 21, respectively, while the Midwest posted a two-point gain to 15.
“Consumers are still trying to sort out market realities and get the best deals they can,” NAHB Chief Economist David Seiders said in a statement. “Many prospective buyers may very well have unrealistic expectations regarding new-home prices as well as how much they can expect to receive for their existing homes. When the market is in proper balance, people can recognize a good deal when it comes along; at this point, they view a good deal as a moving target.”
Seiders added that “builders believe they are taking the right steps to reduce inventories and position themselves for the market recovery that lies ahead,” as NAHB’s housing forecast suggests that home sales will “stabilize within the next six months and show significant improvement during the second half of next year.”