Facing the worst financial market since the Great Depression, builder confidence in the market for new, single-family homes sank to a record low this month. The NAHB/Wells Fargo Housing Market Index (HMI) dropped three points to 14.
All three components of the index declined in October. The indexes measuring current sales conditions and sales expectations for the next six months both fell to new lows at 14 and 19 respectively. The index measuring traffic of prospective buyers retreated to July’s record low of 12.
The drop in the index reflects builders’ concerns with the recent crisis in the financial markets and the weakness in consumer confidence, NAHB chief economist David Seiders said.
“This report provides clear evidence that an additional economic stimulus package is needed, including a substantial incentive to spur home buying." Seiders said. "The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession.”
Every region posted declines in October. The Northeast and South each recorded four-point declines, to 17 and 16, respectively. The West recorded a three-point decline to 10; the Midwest recorded the smallest decline, a one-point drop to 14.
NAHB Chairman Sandy Dunn said the results were expected, given the financial crisis on Wall Street in recent weeks, and expressed support of the government’s attempts to bolster the economy.
“We applaud the coordinated government efforts that have been undertaken to try to stem the panic on Wall Street and ease the impacts on Main Street,” said Dunn, a builder from Point Pleasant, W. Va., “and we stand ready to support additional efforts to help stabilize housing and the national economy going forward.”
The NAHB/Wells Fargo HMI is the product of a monthly survey that NAHB has conducted for more than two decades. It measures builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “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. The last time the index registered higher than 50 was April 2006.
Pat Curry is senior editor, sales and marketing, at BUILDER magazine.