| Builder Sentiment Remains Depressed As Future Outlook Dims |
| Written by Jonathan Smoke | |
| 12.15.2008 | |
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Discuss this article on the forums. (0 posts) The National Association of Home Builders released the December NAHB/Wells Fargo Housing Market Index (HMI) report today. The new report revealed that last month’s record low reading of 9 for the overall index remained pat while two out of three underlying component actually declined further. Sentiment about the present conditions and outlook for the next six months both declined while the traffic reading remained at its all-time low of 7. That means every reading of builder sentiment is at a record low. The survey based data dates back to January 1985 as the chart below illustrates. That current sentiment is negative is no surprise. 2008 is turning out to be the worst year for housing by many different standards. Now with the economy in full job-losing mode, the future is getting darker and darker, thus leading to declining expectations for improvement in the short-term. Leveraging the new data, NAHB representatives continue to sound the alarm for government stimulation of housing: “The crisis continues,” said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W. Va. “While builders are doing everything we can in the way of price and non-price incentives to move new homes off the books, buyers are afraid to move forward, and in any case there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures. Congress and the Administration must step in with substantial incentives to bring qualified buyers back to the table as well as effective foreclosure relief programs if we are to end this negative spiral that is weighing so heavily on our national economy.”
If depressed conditions continue and possibly even get worse in 2009, we may be looking at a substantially different industry structure in the future. That may well be a portion of the darkening mood about next year.“We have seen no improvement over the past month in terms of sales conditions for new homes,” said NAHB Chief Economist David Crowe. “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. At this point it will take definitive government action to stop the slide in home values and turn the tide of consumer sentiment. Expanding the first-time buyer tax credit and providing government action to reduce mortgage rates would go a long way toward arresting this downward spiral, just as a combination of similar moves worked in the 1970s to boost the housing market and economy.” 
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