More Proof of a Poor Housing Market: Builder Confidence at All Time Low

Published Sep 24, 2007 | RSS Feed

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Builder confidence is supposed to be one of the best ways to measure how good or how bad the housing market is performing. If this is true, we are in trouble. According to new index reports issued by the National Association of Home Builders, builder confidence is at a record low.

Builder Confidence in Housing Market*

Area	Q2 2007	Q2 2006	Chg
National	20	22	-2
West	18	22	-4
Midwest	13	14	-1
Northeast	26	29	-3
South	22	24	-2

Builder confidence has been on the decline for 7 straight months, and has fallen to an all time low, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

High inventory and lack of demand are contributing heavily to builder's expectations; however, mortgage market turmoil and resulting consumer sentiment are causing most concerns.

'Builders are expressing concern that home buyers are getting spooked by the many headlines they are seeing on mortgage market issues and their continuing effects on the housing market and home prices,' said NAHB President Brian Catalde.

Survey respondents do not expect to see a recovery in housing before late 2008.

Builder Confidence in Condo Market*

Q2 2007	Q2 2006	Chg
26.3	33.6	-7.3

Builders do not expect any improvement in the condo sector before the end of the year. NAHB Chief Economist David Seiders says excess inventory and mortgage market turmoil are delaying the possibility of recovery for condo builders.

Builder Confidence in Rental Apartment Market*

Apartment Type	Q2 2007	Q2 2006	Chg
Luxury	63.8	73.2	-9.4
Moderately-Priced	67.7	71.4	-3.7
Low-Priced	66.0	68.0	-2.0

The above shows the component of the index related to rental demand for multi-family apartments. Numbers in this component moved down slightly from the same quarter last year, as did the numbers for supply and volume expectations. Still, multi-family builders and developers remain optimistic about the rental market.

*The Housing Market Index (HMI), the Multifamily Condo Market Index (MCMI), and the Multifamily Rental Market Index (MRMI) released by the National Association of Home Builders (NAHB) are derived from a quarterly survey of builders and developers. Reponses are on a 100-point scale; 50 is considered normal.

Market Predictions

With so much going on in the housing market right now, it is difficult to predict what will happen next. But, if the market index reports released by the NAHB are any indication, this housing slump is far from over.

In 1991, when index levels were nearly as low as they are now, home prices started to fall, and continued to decline for five years in many areas of the nation. In other words, we could be waiting for half a decade for prices to finally hit bottom.

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