Homebuilders Lose Confidence After Homebuyer Tax Credit Expires
One of the timeliest leading indicators for real estate prices -- the homebuilder confidence survey published by the National Association of Home Builders/Wells Fargo -- dropped five points, or 22 percent, in June to a reading of 17. That's the lowest level since March, when the housing tax credit started pushing buyers into the market.
Mike Larson, real estate analyst at Weiss Research, points out it's also the biggest monthly drop since the depths of the recession in November 2008.
"We all knew there would be some kind of give-back after the homebuyer tax credit euphoria last spring," he tells AOL HousingWatch, "but it's a sizable drop and more than what economists were looking for."
Larson's view could be heard from other experts today: The consensus is that the housing market is back in the doldrums after a fake boost of demand.
"The homebuyer tax credit did its job in stoking spring sales and we expected a temporary pullback in the builders' outlook after the credit expired at the end of April," said NAHB Chairman Bob Jones in the release. "However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels."
It's not just that builder confidence about current sales conditions are down; their sales expecations for the next six months also dropped -- by 4 points, to 23. This survey matters because homebuilders are among the first to be affected by changes in housing appetite, and this is one of the most up-to-date indicators that we have: Responses actually were collected in the first week of June. By contrast, indicators released by the National Association of Realtors, Case-Shiller and others only go until April. Plus, NAHB has been conducting it for 20 years, which means that hopefully they've figured out the kinks.
Of course, the tricky thing about confidence surveys is that they gauge something that's impossible to accurately measure. We'll have to wait to find out whether the sentiment is accurate as homebuyers return to normal behavior.
Tomorrow we should see another reliable market indicator: The U.S. Census Bureau releases May's new residential construction numbers at 8:30 a.m. EDT. Stay tuned.