| Deteriorations in Key Metrics Lead NAHB to Lower Forecasts |
| Written by Jonathan Smoke | |
| 07.11.2007 | |
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Discuss this article on the forums. (0 posts) In the most recent Seiders’ Report issued on July 10, David Sieders, chief economist for the National Association of Home Builders, highlighted a further deterioration in builder sentiment as measured by the Housing Market Index: “NAHB’s single-family Housing Market Index hit a current-cycle low of 28 in June, down from a high of 72 in mid-2005. The HMI was down by more than 50 percent in all four regions of the country, and all three component measures (current and expected sales as well as traffic of prospective buyers) had values less than half their 2005 peaks.”
According to Seiders, deterioration is likely to continue through the end of 2007 as credit tightening has pushed the market down through a continuing higher than normal level of cancellations. “The housing downswing has been underway for roughly two years and most indicators point toward further deterioration. A nationwide survey of more than 400 single-family builders, conducted by NAHB in June, sought to gauge market momentum at mid-year and to identify builders’ production plans for the second half of 2007. The survey highlighted the adverse impacts of the subprime mortgage crisis on sales and cancellations and reinforced our judgment that housing starts will decline moderately in the second half of the year.
Most housing indicators show ongoing deterioration of market conditions through all or most of the second quarter, and it’s clear that the subprime-related tightening of mortgage market conditions has provoked an extra downleg to the housing downswing that began in the second half of 2005.” This deterioration and negative sentiment provided the foundation for further downward revisions to NAHB’s forecast for housing starts. Their latest forecast now calls for a 23% decline in single-family starts in 2007 over 2006. Starts are expected to recover slightly in 2008, rising 2%. The following chart illustrates the latest forecast compared to the August 2006 forecast. )) 
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