Concerns about the substantial inventory of new homes for sale in the U.S. and the effects that deepening mortgage market problems are having on buyer demand caused U.S. builder confidence to decline for a seventh consecutive month in September, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI dropped two points to 20, tying its record low reached in January 1991.
Derived from a monthly survey, 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.
Two out of three component indexes declined in September. The index gauging current single-family home sales declined two points to 20, while the index gauging sales expectations for the next six months fell five points to 26. The index gauging traffic of prospective buyers held steady at 16 for the month.
All four regions of the U.S. reported declines in their September HMI readings. The Northeast posted a three-point decline to 26, while the Midwest posted a single-point decline to 13, the South posted a two-point decline to 22, and the West posted a four-point decline to 18.