The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for new single-family homes slipped one point to 18 in October. Analysts on Wall Street were expecting a rise to 20.
The NAHB attributed the decline to builder concern over the Nov. 30 expiration of the federal tax credit for first-time home buyers. "Clearly, builders are experiencing the effects of the expiring tax credit on their sales activity, since it would be virtually impossible at this point to complete a new-home sale in time," said David Crowe, NAHB's chief economist.
Moreover, the declines were led by the West, where the California home buyer tax credit has already expired.
NAHB chairman Joe Robson used the release of the HMI to renew the organization's call for passage of a new, expanded tax credit by Congress. "It comes as no surprise that after trending upward from a historic low in January, the HMI's positive momentum now appears to have stalled," said Robson. "Our economists have repeatedly warned that the approaching expiration of the $8,000 home buyer tax credit on Nov. 30, combined with the massive hurdles that builders face in obtaining construction financing and appropriate appraisals on new homes, could derail the fragile recovery in housing just as it is starting to take shape."
All three of the component indices fell, the first time that has happened since last November. The index gauging current sales conditions fell one point to 17, the index of sales expectations for the next six months declined two points to 27, and the index of traffic of prospective buyers fell three points to 14.
Regionally, the Northeast posted a one-point gain to 25. The Midwest and South each fell one point to 18, and the West dropped four points to 14.