Builders of new single-family homes remain pessimistic over the state of the housing market, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
The HMI remains stuck at 20, where it has held steady for three months now, the NAHB reported Tuesday afternoon. The index hit a record low of 18 in December, 2007, its bottom since the index was created in 1985.
"While builders continue to report improvements in traffic through their model homes compared with late last year, this activity has not translated to actual sales," said NAHB chief economist David Seiders.
His comments were echoed by Sandy Dunn, a builder from Point Pleasant, W.Va. who is serving as NAHB's president this year. "With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year," said Dunn.
The component index gauging current sales conditions declined two points to18 in April, its lowest level since November 2007. The component gauging traffic of prospective buyers held even at 19 for a third consecutive month, up from a low of 13 in December. The component gauging sales expectations for the next six months rose four points to 30, although this measure was down substantially from a year earlier, when that index stood at 41. A reading of 50 indicates a neutral market.
Regionally, the overall index was up a point to 22 in the Northeast, down a point to 15 in the Midwest, down two points to 24 in the South and up two points to 17 in the West.
Both Seiders and Dunn called on Congress to act on housing relief legislation now under review in the House. "That's where Congress can make a big difference," Seiders said. "Measures that stimulate consumer confidence in the housing market, push the fence-sitters into the ring and put a floor under house prices can successfully halt the drag that housing is exerting on the national economy, and help stabilize financial markets at the same time. But such measures need to be implemented as soon as possible in order to limit the severity of the economic recession that now is underway."
This was the first acknowledgement from Seiders that the U.S. economy has fallen into recession, which he characterized as mild at present but that is subject to what he called, in a line borrowed from the Federal Reserve Open Market Committee, "substantial downside risks."
David Goldberg, home building analyst at UBS, put out a note urging investors not to "be deceived by traffic levels. For April," he wrote, "the traffic of prospective buyers remained flat sequentially. Although this represents a 36% increase from the January level, we believe it reflects a combination of normal seasonal trends and opportunistic buyers that are trying to purchase homes at significant discount to current prices."
Carl Reichardt, home building analyst at Wachovia Securities, took a similar view. "It is clear to us that the modest pick-up in traffic witnessed earlier in the selling season (February)was an anomaly, not a stepping stone to better market conditions. Absorptionsremain weak as buyers continue to struggle with mortgage qualifications despiteimproved affordability and lower interest rates." However, on a more upbeat note, Reichardt wrote, "That being said, builder sentimentregarding future sales conditions is positive in our view."