U.S. builder confidence in the market for new single-family homes was further shaken in October due to continuing problems in the mortgage market, substantial inventories of unsold units, and the perceived effect that negative media coverage is having on potential buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI fell two more points to 18 in October, its lowest point since the series began in January of 1985.
"Consumers are still trying to sort out market realities and get the best deals they can," noted NAHB Chief Economist David Seiders. "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."
The positive news from today's report, said Seiders, is that builder expectations for sales conditions in the next six months held steady at 26. "Builders believe they are taking the right steps to reduce inventories and position themselves for the market recovery that lies ahead," he said. "Indeed, NAHB's housing forecast indicates that home sales should stabilize within the next six months and show significant improvement during the second half of next year."
Regionally, the West part of the United States 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.