Builders' confidence sinks to new low
A survey of homebuilders' assessment of the housing market shows the industry's sentiment fell in November to yet another low.
NEW YORK (CNNMoney.com) -- Homebuilders' confidence in the housing market again plunged to a record low, dragged down by poor financial market conditions, rising unemployment and consumer anxiety, a trade group said Tuesday.
The National Association of Home Builders (NAHB)/Wells Fargo housing market index for November fell to a seasonally adjusted reading of 9, the lowest recorded level since the index began in 1985. Economists surveyed by Thomson/IFR expected the index to remain at 14, the previous record low set in October.
A reading below 50 indicates that builders who think home-sales conditions are poor outnumber those who think the environment is positive for sales. November's reading was the sixth record low set or matched in the past seven months.
"Today's report shows that we are in a crisis situation," said Sandy Dunn, NAHB chairman, in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back."
Builders were asked for their view of the current market, the number of buyers looking at homes and expectations for six months from now.
Of the more than 400 homebuilders surveyed, nearly all - 98% - of the builders surveyed believe consumer concern about the economy was a key problem currently facing the housing market. Other issues receiving almost unanimous agreement were buyers' inability to sell their existing homes, continued dour news about the market and tight mortgage lending conditions.
The future outlook was grim. Of the builders surveyed, 49% plan to build fewer homes in the first half of 2009 compared to the second half of 2008, while just 16% expect to build more homes. Overall, builders said they anticipate constructing 17% fewer homes in the first six months of next year compared to the last half of this year.
"This November data is downright atrocious," said Mike Larson, analyst at Weiss Research. "If you're looking for a glimmer of hope for the housing market, you aren't going to find it in the latest figures."
Larson said builder confidence deteriorated due to the double-punch of the credit crisis and economic downturn.
"Ultimately, it will take lower home prices, even less building activity, and an economic recovery to lay the groundwork for a lasting market rebound," Larson said. "But that is in the future, not the present."
As a result of a battered market, the Bush administration last week unveiled a new program to modify mortgages and stabilize the battered real estate market. But the plan stops short of providing direct government financial help to at-risk homeowners, something FDIC chairwoman Sheila Bair later said she supports.
David Crowe, chief economist for NAHB, said he supported even more government intervention, including raising the government's $16 billion of tax credits, which were set at $7,500 per qualified buyer in July.
"Congress should consider significant consumer incentives such as expanding the first-time homebuyer tax credit and providing a government buydown of mortgage interest rates for home purchasers," Crowe said.
Tuesday's report came a day ahead of the government's report on housing starts and building permits for October, which economists forecast will fall to a 60-year low. In September, housing starts hit a 17-year low.
Shares of homebuilders were mostly lower Tuesday. Pulte Homes (PHM, Fortune 500) rose 3%, but Lennar Corp. (LEN, Fortune 500) lost 3%, Centex Corp. (CTX, Fortune 500) and D.R. Horton Inc. (DHI, Fortune 500) fell 5%, Hovnanian (HOV, Fortune 500) slid 4%, and Radian Group (RDN) traded down 8%.