Homebuilder Confidence Remains Low as Housing Market Stalls

home builderThe housing industry is still treading water. The National Association of Home Builders' Housing Market Index for September remained at 13, unchanged from August -- the index's lowest level since March 2009.

A Bloomberg survey had expected the index to rise to 14 this month. Readings over 50 indicate that more builders view sales conditions as good than poor. The index was at 14 in July and 16 in June. It hit an all-time low of 8 in January 2009 and an all-time high of 72 in June 2005.

Two Components Were Unchanged

Two of the index's three components remained the same in September. The component gauging current sales conditions was unchanged at 13, and the six-month sales expectations component was unchanged at 18. Meanwhile, the traffic of prospective buyers component dipped to 9 from 10 in August.

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Regionally, HMI results were mixed in September, rising two points to 14 in the South, but falling two points to 16 and 12, in the Northeast and Midwest, respectively. The index was unchanged at eight in the West.

David Crowe, NAHB chief economist, said the attitude of home builders is being driven by a large supply of homes for sale -- an inventory ballooned by foreclosures -- and by sub-par U.S. job growth.

"The stall in the nation's housing market continues," Crowe said, in a statement. "Builders report that the two leading obstacles to new-home sales right now are consumer reluctance in the face of the poor job market and the large number of foreclosed properties for sale. However, we do expect that moderate improvement in the job market will help boost consumer confidence and improve conditions for new-home sales in this year's final quarter."

Housing Sector Has a Low Pulse

September's homebuilder confidence report confirms a housing market that has a pulse, but a faint one. Home builder confidence has fallen roughly in-sync with the decline in both new- and existing-home sales this summer, which followed the end of the home buyer tax credit. The latter event demonstrated that a considerable portion of home sales and builder activity was dependent on the credit.

Even so, with the 2010 campaign season in full swing and a feeling of austerity permeating Capitol Hill, Congress appears to be in no mood to renew the home-buyer tax credit for a second time. However, such inaction will likely weigh on U.S. GDP growth, if some other factor does not surface to increase home sales, given the historically important relationship between homebuilding/housing sales and U.S. economic growth.
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