Builder Confidence Slides in August

Washington, DC, August 15, 2007 - Highly visible problems in the housing finance system are contributing to a wait-and-see attitude among prospective home buyers and reducing builder confidence in the single-family housing market, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

The HMI declined two points to 22 in August, its lowest level since January 1991.

“Builders realize that issues related to mortgage credit cost and availability have become more acute, filtering some prospective buyers out of the market and prompting others to delay their decision to purchase a new home,” said NAHB president Brian Catalde, a home builder from El Segundo, Calif.

“Builders are responding by trimming prices and stepping up non-price incentives to bolster sales and limit cancellations, although we’re dealing in a difficult market environment.”

Problems in the subprime mortgage sector have spilled over to other components of housing finance, including the jumbo markets, said NAHB chief economist David Seiders.

But, he said, the government-related parts of the mortgage market still are functioning well and the underlying economic fundamentals promise to remain solid. He expects home sales to start rising early next year 

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months.

Any number over 50 indicates that more builders view sales conditions as good than poor.

All three component indexes declined in August. The index gauging current single-family home sales fell a single point, to 23, while the index gauging sales expectations for the next six months declined two points to 32 and the index gauging traffic of prospective buyers declined three points to 16.

Three out of four regions of the country posted declines in the August HMI. While the South’s HMI reading remained unchanged at 25, the West recorded a one-point decline to 23, the Northeast posted a two-point decline to 30 and the Midwest posted a five-point decline to 14.