Builder confidence in the new-home market remained stuck at 15 on a scale of 100 in August, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Analysts were expecting a flat reading.
Two of three component indices, meanwhile, posted marginal gains, with the index measuring current sales conditions gaining a point to 16, the index gauging traffic gaining a point to 13 and that measuring sales expectations for the next six months dropping two points to 19. The reading of 16 on current sales conditions was the highest that index has reached since March.
Builder sentiment was mixed by region. The Northeast HMI gained four points to 19, the West rose a point to 15, the South was flat at 17 and the Midwest dropped two points to 10.
"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said David Crowe, chief economist at NAHB. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."
A special question asked in the August survey revealed that 41% of the builders surveyed said they had lost sales contracts due to buyers'inability to sell their current homes.
"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, a home builder from Reno who is serving as NAHB chairman.
The survey is based on an index of 100 in which any number over 50 indicates confidence.
Wells Fargo housing analyst Adam Rudiger said in a research note, "While a reading of 15 is already severely depressed, we were actually expecting the HMI to decline given recent heighted expectations for a recession, concerns over the U.S. debt situation, slow job recovery, and recent increases in stock market volatility. The one component of the index that did actually decline was the 'Single-Family Sales: Next 6 Months.' We note last month that component showed a six-point increase which appeared to us, at the time, to be largely based on hope. This month, we believe the previously mentioned concerns likely depressed those expectations.