At the end of a disappointing summer, builder confidence fell in September, dropping one point to a reading of 14 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Declines appeared in each of the index’s three components, with current sales conditions dropping one point to 14, sales expectations for the coming six months falling two points to 17, and prospective buyer traffic declining two points to 11.
Weak morale is hardly surprising after a depressing summer in which July's pending sales slipped, starts and permits fell, and new-home sales declined for the third month in a row. (August's numbers have not yet been released.) However, low confidence among builders is far from new. September marked the sixth consecutive month in which the index has held between 13 and 16. The index requires a reading of more than 50 to indicate that more builders rank conditions as "good" rather than "poor."
"Very little has changed in terms of housing market conditions so far this year," said Bob Nielsen, NAHB chairman, in a statement regarding the numbers today. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit."
Indeed, builders aren't the only ones feeling gloomy. The National Federation of Independent Business’ small business optimism index fell to a reading of 88.1 in August, the lowest level since July 2010. The net percentage of firms that expect higher selling prices fell from an already low 7% in July to a dismal 1% in August. The net percentage of firms that expect their sales to grow was already in negative territory in July and fell even further last month.
Consumer confidence has also been weak. During the first week of September, Bloomberg News' Bloomberg Consumer Comfort Index fell to the second-lowest level seen this year. That index hasn't moved above -40 (the level indicating recessions or their aftermath) since February.
The Midwest posted the HMI's only regional improvement with a one-point gain, bringing it to a reading of 11. The Northeast and South each saw two-point declines, dropping each area to a reading of 15. The West fell by three points to a reading of 12.
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.