Builder confidence holds at historic lows
Industry group says homebuilders' sentiment remained low in December as economic conditions deteriorate.
NEW YORK (CNNMoney.com) -- Homebuilders' confidence remained at an all-time low in December as worsening economic conditions weighed on the housing market, a trade group said Monday.
The National Association of Home Builders (NAHB)/Wells Fargo housing market index for December was unchanged from November's seasonally adjusted reading of 9, the lowest recorded level since the index began in 1985.
A reading below 50 indicates that builders who think home-sales conditions are poor outnumber those who think the environment is positive for sales. The index has been below 50 since May 2006.
"We have seen no improvement over the past month in terms of sales conditions for new homes," said NAHB chief economist David Crowe in a statement. "In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence."
The part of the index that measures current sales conditions fell one point to a reading of 8 in December. A year ago, that same index stood at 18.
Looking ahead, the index that measures sales expectations for the next six months fell to 16 from 18 in the previous month. A year ago, it was 26.
Traffic by prospective buyers was unchanged in December, with an index reading of 7, marking an all time low for the measure.
Homebuilders' assessment of the housing markets in the Midwest and South deteriorated further in December while the index for the Northeast was unchanged. But the index for the West, which had been the weakest of the four regions last month, rebounded slightly in December.
"The crisis continues," said Sandy Dunn, NAHB chairman, in a statement. "Buyers are afraid to move forward, and...there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures."
More than 1 million homes have been lost to foreclosure since the housing crisis hit back in August 2007, according a report last week from RealtyTrac, an online marketer of foreclosure properties. And foreclosures are expected to continue rising as the economy remains mired in recession.
Earlier this month analysts at Credit Suisse forecast 8.1 million foreclosures by the end of 2012, accounting for 16% of all U.S. mortgages.
In addition to the glut of foreclosed properties, which deters new construction and erodes the value of existing homes, the housing market is being drained of potential buyers by rising unemployment, according to Crowe.
So far this year, the economy has lost nearly 2 million jobs, according to the Labor Department.
"Builders are detecting the fact that we're in a recession," Crowe said. "Not only has it been bad for a year but it seems to be accelerating toward the negative."
Meanwhile, the weak economy and the housing glut have driven home prices sharply lower this year.
The real estate Web site Zillow.com said Monday that American homeowners will collectively lose more than $2 trillion in home value by the end of 2008.
At the same time, credit conditions remain tight, making it difficult for willing buyers to take advantage of low prices, Crowe said. 
