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Portfolio > Economy & Markets

House Builders Stayed Pessimistic in August

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Washington (AP)—U.S. homebuilders are just as pessimistic about the depressed housing market as they were two years ago.

The National Association of Home Builders (NAHB) said Monday that its index of builder sentiment in August was unchanged at 15. The index has been below 20 for all but one month during the past two years.

Any reading below 50 indicates negative sentiment about the housing market. It hasn’t reached 50 since April 2006, the peak of the housing boom.

Separate gauges of current single-family home sales and foot traffic of prospective buyers each rose one point this month. But the outlook for sales for the next six months fell two points.

Last year, the number of people who bought new homes fell to its lowest level dating back nearly a half-century. Sales this year haven’t fared much better.

(Click here to enlarge chart)

Builders are struggling to compete with foreclosures, which have made the price of re-sales more competitive. Many buyers are having difficulty obtaining loans or meeting higher down payment requirements. Low appraisals are scuttling some deal after contracts have been signed. Some would-be buyers who want to purchase a new home can’t sell their old one.

While new homes make up a small portion of sales, they have an outsize impact on the economy. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ trade group.

A special question on the survey this month showed that 41 percent of builders had lost a contract because a buyer could not sell their current home, said Bob Nielsen, chairman of the builders’ group.

David Crowe, the group’s chief economist, said a weakening U.S. economy and high unemployment are also “discouraging many potential buyers from exploring a home purchase.” Even record-low mortgage rates have done little to boost sales.

An index of builders’ outlook in the Northeast and West rose four points and one point, respectively. Sentiment in the South stayed the same in August while it declined two points in the Midwest.


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