Home Builder Sentiment Hits Low in October

Washington, DC, Nov. 18, 2008--Pessimism has never been higher among U.S. home builders as it was in early November, the National Association of Home Builders reported Tuesday.

"We are in a crisis," said Sandy Dunn, chairman of the NAHB, and a builder from Point Pleasant, W.Va. "If there's any hope of turning this economy around, Congress and the administration need to focus on stabilizing housing."

"Worsening problems in the financial markets, job market weakness and overwhelming uncertainty about the economy" were depressing sales, the NAHB said in a release.
 
Economists were expecting the index to be unchanged at 14, but it fell to 9.

The NAHB/Wells Fargo housing market index shows that fewer than one in 10 builders is optimistic about the market for new single-family homes, with builders particularly discouraged about the pace of sales and the dearth of potential buyers. They are slightly more optimistic that sales could improve over the next six months.

The home builders' index has been falling for nearly three and a half years after peaking at 72 during the height of the housing bubble. The index dates to 1985.
 
Over time, the builders' index has been closely correlated with housing starts, which are expected to fall to a post-World War II low in October.

The October housing starts data will be released Wednesday by the Commerce Department. Economists expect starts to fall about 5% to a seasonally adjusted annual rate of 776,000. Starts are down 31% in the past year and are off 64% from the 2006 peak.

Builder sentiment plunged to record lows in all four regions in November. Sentiment fell from 11 to 6 in the West and plunged from 13 to 7 in the Midwest. The declines were shallower in the South and in the Northeast, where the index fell from 16 to 11.