Home builders are no more confident in the new-home market than they have been for the past four months, the National Association of Home Builders reported Tuesday.
The NAHB/Wells Fargo Housing Market Index remained stuck at 16 in February, right where it has been since November. The reading was in line with analyst expectations. However, two forward-looking indicators in the index registered small gains.
"Builders are telling us that some pockets of optimism have begun to emerge, but many prospective purchasers are concerned about selling their existing home in the current market, or face difficulty securing credit for a home purchase -- even when they are well-qualified," said David Crowe, NAHB chief economist. "Adding these concerns to the severe difficulty that builders continue to confront in obtaining acquisition, development and construction financing, you can understand why builder sentiment has not improved over the past four months."
Two of the HMI's three component indices edged slightly upward in February, with the component gauging current sales conditions rising two points to 17, where it was in June, 2010, and the component gauging sales expectations in the next six months gaining a point to 25, the highest it has been since last May. The component gauging traffic of prospective buyers held steady at 12.
A reading of more than 50 indicates a postive outlook; less than 50 is negative.
On a regional basis, the HMI in the Northeast rose two points to 22, the South was up one point to 18, the Midwest dropped a point to 12 and the West lost two points to 13.
J.P. Morgan analyst Michael Rehaut said in a research alert that "we view these data points as consistent with our outlook for the housing market to continue to demonstrate stable to slightly improving trends."
He continued, "We believe supply continues to remain manageable, as existing homes for sale are 22% below peak levels and foreclosures continue to liquidate at a moderate pace. Accordingly, we maintain our positive sector stance based on the group¹s compelling risk/reward, in our view, as we believe the stocks are discounting at least a 5-10% decline in home prices, which includes a resurgence of impairment charges, margin compression and book value erosion. This is in contrast to our outlook for home prices to be flat to down 3% in 2011, along with a continued minimal amount of charges, improving order trends in 2011, and more builders turning profitable, all of which we believe represent positive catalysts, and hence support our positive stance."