The shaky economy, seasonality and tight credit took their toll on builder confidence this month as the National Association of Home Builders Wells Fargo Housing Market Index dropped one point from November to 16. The HMI, released early Tuesday afternoon, pressured the home builder stocks, nearly all of which fell from their intraday highs on the news.
The drop to three points below the 2009 peak of 19 in September was down from a reading of 17 in November and a downwardly revised index of 17 in October. It remained well above its historic low of 8 in January. A reading higher than 50 indicates optimism among respondents.
The decline, however, was not evident in three of the four regional HMIs.Builder confidence in the Northeast increased 3 points to 23, was up a point in the West to 19 and remained flat with November in the South at 17. The Midwest index fell 2 points to 12.
It was evident in two of the three component indices of the overall HMI, with the gauge for current sales conditions dropping a point to 16, that for sales expectations for the next six months losing two points to 26 and the component index for traffic of prospective buyers remaining flat at 13.
"As we anticipated, this is shaping up to be a bumpy recovery period for the housing market," said David Crowe, NAHB chief economist. "While some families may be just starting to factor the expanded tax credit into their potential home buying plans, many are hesitating because of the poor economy. At the same time, tight lending conditions for both consumers and home builders continue to pose considerable obstacles on the road to a sustained housing and economic recovery."