October certainly is proving to be the cruelest month for builders. According to the NAHB-Wells Fargo Housing Market Index, builder confidence plunged into single-digit territory in October with a historically low reading of 9.
Yes, nine. Out of a possible 100.
Those results are significantly lower than the expectations of analysts, who had projected a reading of 14. But a terrible economy, tight lending situation, and the loss of seller-funded down payment assistance as of Oct. 1 are clearly affecting builders, buyer traffic, and sales.
Current single-family sales, one of the HMI's three components, tumbled six points to a reading of 8 in October. Buyer traffic proved even more scarce, with that dropping four points to a reading of 7.
"A lot of people are going directly to banks" before even visiting sales centers, said Jeff Burton, president of American Dream Development, a small builder in Junction City, Kansas. "We are not having contact with people who are just looking. They are either coming pre-qualified [for a mortgage] or they are not coming at all."
Yet somehow builders are retaining some shred of optimism; the reading for sales expectations over the next six months stayed steady at 19.
Perhaps that's because in terms of consumer psychology, October and its uncertainty--particularly about who would be elected president--may have been a watershed month. At Holiday Builders in Florida, President and CEO Kim Shelpman says she has noticed an improvement in buyer traffic since the election, during a typically slow period for sales.
"I've heard a whole different attitude from our sales force," Shelpman says. "They've got multiple leads that they are working, not just one. The entire confidence level has gone through a tweak--I'm not going to say we're in correction mode, but I do have my fingers and toes crossed that we have gone to the worst place and that buyers are now regaining some confidence...It's a small glimmer of hope, but we'll take it."
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Manhattan, KS.