Builders' confidence matches record low
A survey of homebuilders' assessment of the housing market shows the industry's sentiment tied the mark set in December.
NEW YORK (CNNMoney.com) -- Homebuilders' confidence in the weak housing market fell in June, matching the record low in a monthly industry assessment index, a trade group said Monday.
Sales volume will continue to erode in the months ahead and hurt the general economy, according to David Seiders, chief economist of the National Association of Home Builders.
"Obviously, this isn't terribly encouraging," Seiders said. "Housing still occupies a major place in the slowdown process ... putting pressure on GDP growth and the labor market."
The NAHB/Wells Fargo housing market index for June fell 1 point to a seasonally adjusted reading of 18, down from May's reading of 19. Economists surveyed by Thomson/IFR expected the index to rise to a reading of 20.
A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales. June's reading ties the record low level reached in December 2007.
Builders were asked for their view of the current market, the number of buyers looking at homes and expectations for six months from now.
Only 5% of the builders surveyed believe the current market is favorable, down from 6% in May. Of the more than 300 homebuilders surveyed, 70% view the market as poor, up from 69% in the previous month.
"These numbers aren't surprising ," said Wachovia economist Adam York. "We may be in one of the worst housing markets in 1985, and starts can continue to fall for another few months."
Half of the builders said they now expect conditions to remain poor six months from now, which is down from 51% who were expecting a poor outlook in the previous reading. But just 7% of builders said housing market will be favorable by the end of the year.
Seiders had previously forecast sales of new homes to bottom out somewhere in middle of 2008, but he said he now expects that trough to occur a little bit further in the future. He said home prices are still accelerating sharply downwards, and he does not believe prices will begin to tick upwards until sometime in early 2009.
As a result of a battered market, NAHB Chief Executive Jerry Howard urged Congress to pass H.R. 3221, a bill that includes a temporary home buyer tax credit of up to $7,500 for first-time home buyers or haven't purchased a home in three years.
Qualified buyers must earn less than $70,000 - or $140,000 for a couple - after which point the tax credit begins to phase out. The legislation passed the House, and is awaiting a vote from the Senate.
"While the Fed has been very aggressive in their attempt to break housing's fall, it's now Congress' job," said Howard. "That tax credit needs to be as big and as rapid-acting as Congress can make it."
York, however, said the plethora of government housing programs and bills are having some marginal effect on market place, but none of the programs passed or proposed is the "silver bullet."
"This thing's not going to turn around until mortgage market corrects itself," said York.
Monday's report came a day ahead of the government's report on housing starts and building permits for May, which economists forecast will fall close to 17-year lows after unexpected gains in those measures in the April report.
Shares of homebuilders were mostly higher Monday.Lennar Corp. (LEN, Fortune 500) and Centex Corp. (CTX, Fortune 500) each added more than 3%, and D.R. Horton Inc. (DHI, Fortune 500) and Hovnanian (HOV, Fortune 500) gained more than 1% in afternoon trading.