Condo Builders' Confidence Drops

Washington, DC, September 21, 2007--Despite reporting increased traffic by prospective buyers, condominium builders and developers are extremely concerned about the current conditions in the condo market, according to the latest results of the Multifamily Condo Market Index (MCMI), released today by the National Association of Home Builders (NAHB).

The index lost 14 points in the second quarter of this year to stand at 18, which is 14 points lower than it was a year ago—and its lowest level since NAHB created the index five years ago.

“The problems in the mortgage market are rattling consumer confidence in for-sale housing at the same time that the condo sector is trying to shake off excess inventory in a lot of markets,” said NAHB Chief Economist David Seiders. “That combination is delaying any recovery in the condo sector.”

The index is derived from a quarterly survey of multifamily builders and developers, in which their responses are rated on a scale of 1 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

According to the index, multifamily builders do not expect improvement in the condo sector through the end of the year. The index gauging condo builders’ expectations for the next six months declined to 26.3 in the second quarter of 2007, compared with 33.6 at the same time a year ago.

On the positive side, multifamily builders did report an uptick in traffic of prospective buyers in the second quarter: The index tracking this measure of demand jumped 10 points, up to 36.8 in the second quarter, compared with 26.8 in the second quarter of 2006.