Builder confidence has reached a 2007 low and is down nearly 20 points from April 2006 according to the National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (HMI). The HMI dropped three points to 33 in April. One year ago, the HMI was at 51.
The turmoil within the subprime mortgage market was cited by the NAHB as one of the major factors.
"The subprime shakeout clearly is a serious matter for the single-family housing market," says NAHB President Brian Catalde. "Builders in the field are reporting adverse effects on both sales and cancellations at this time, and it remains to be seen how serious these effects will be as we move through the spring home buying season."
"The tightening of mortgage lending standards in connection with the subprime crisis has shaken the confidence of both consumers and builders, as reflected in this report," adds David Seiders, NAHB chief economist. "Indeed, the unfolding effects of this crisis have compelled the NAHB to trim our forecasts of home sales and housing production for both 2007 and 2008. While we still expect to see some improvements in housing market activity beginning later this year, the downside risks and uncertainties surrounding that forecast are considerable."
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair," or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average," or "low to very low."
Seiders says the HMI used specific questions to determine what role the subprime issue has in the declining confidence. He also pointed out that nothing else has changed in the economy or market.
"We are getting widespread reactions on the negative," he explained about the most recent HMI polling.
When asked if he thought the HMI would improve anytime soon, Seiders told BUILDER Online, "We'll see how it goes. I wouldn't expect much recovery from this for a couple of months."