The National Association of Home Builders (NAHB)/Wells Fargo housing market index showed builders’ confidence in the newly built, single-family housing market dropped to its lowest point since April 2009, down two points to a reading of 14 in July, according to the index released Monday, July 19.
Analysts had expected the NAHB housing market index to hold steady at 16 in July, the same as its revised reading of 16 in June. Index readings above 50 indicate that home builders are optimistic about their prospects.
Economic difficulties, tight consumer credit, and the end of the federal tax credit program were blamed for the drop in confidence.
“We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program’s deadline,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Michigan, in the July NAHB index release. “In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets.”
Further, the lower index reflects underlying market conditions such as hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction, said NAHB Chief Economist David Crowe.
“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” Crowe explained. “That said, we do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year, and that new-home sales will improve by 10% in 2010 from 2009.”