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Homebuilder Confidence in U.S. Declines to Three-Month Low

Homebuilder Confidence in U.S. Declines to Three-Month Low
Construction workers assemble a home in Phoenix on June 29, 2011. Photographer: Joshua Lott/Bloomberg

Sept. 19 (Bloomberg) -- Confidence among U.S. homebuilders fell to a three-month low in September as prospective buyer traffic, sales and purchase expectations declined.

The National Association of Home Builders/Wells Fargo sentiment index dropped to 14 from 15 in the prior month, data from the Washington-based group showed today. Economists surveyed by Bloomberg News projected no change in the measure from August, according to the median forecast. Readings below 50 mean more respondents said conditions were poor.

Unemployment above 9 percent, stagnant incomes and slumping stock prices are hurting confidence and may be dissuading many Americans from purchasing new houses even with mortgage rates at record lows. Builders are also competing with a surfeit of unsold properties that has dragged down existing-home prices.

“Many consumers are simply unwilling or unable to move forward with a home purchase in today’s uncertain economic climate,” David Crowe, chief economist at NAHB, said in a statement. “The broader picture remains fairly bleak due to the weak economy and job market.”

Estimates of the 48 economists surveyed by Bloomberg ranged from 13 to 16.

The gauge, which was first published in January 1985, reached a record low of 8 in January 2009 and averaged 54 in the five years before the recession began in December 2007.

The builders group’s index of current single-family home sales eased to 14 in September from 15 in the previous two months, the report showed. A measure of sales expectations for the next six months dropped to 17 this month from 19. The gauge of buyer traffic decreased to 11, the lowest level this year, from 13 last month.

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

By Region

Builders in three of the four regions saw a drop in confidence this month. The index fell to 15 from 17 in both the Northeast and the South. The gauge dropped to 12 in the West from 15. In the Midwest, the measure rose to 11 from 10.

“With all of the economic turmoil, both domestic and international, there’s not much that points to an improving housing market at any point in the near future,” Ara Hovnanian, chairman and chief executive officer of Hovnanian Enterprises Inc., said in call with analysts on Sept. 8. “Our internal business plan assumes market conditions do not improve.”

New single-family homes sold in July for a median price of $222,000, Commerce Department data show. The median price of an existing home that month was $174,000, according to the National Association of Realtors. The gap between the values has averaged $61,157 so far this year, the widest since at least 2000.

Bernanke on Housing

Federal Reserve Chairman Ben S. Bernanke said that while housing has been a driver of recoveries after most U.S. recessions since World War II, the rate of new home construction has remained at less than a third of its pre-crisis level. He cited an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by potential borrowers and lenders about continued price declines.

“The low level of construction has implications not only for builders but for providers of a wide range of goods and services related to housing and homebuilding,” Bernanke said in Aug. 26 speech in Jackson Hole, Wyoming. “The weakness of the housing sector has in turn had adverse effects on financial markets and on the flow of credit.”

To contact the reporter on this story: Alex Kowalski in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

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