In a survey in which most responses were received prior to congressional action to keep an important homebuyer incentive alive, builder confidence in the market for newly built, single-family homes remained unchanged at a low level this November, the National Association of Home Builders (NAHB) reported. The NAHB/Wells Fargo Housing Market Index (HMI) held flat at 17 while its component gauging sales expectations for the next six months rose two points from the previous month, to 28.
"When the HMI survey was conducted at the beginning of this month, home builders were facing the imminent expiration of the $8,000 first-time home buyer tax credit at the end of November, with no guarantee that this valuable buyer incentive would be extended," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "Now that Congress has done its job by both extending the tax credit into next year and expanding eligibility for it among potential buyers, we are very hopeful that this will have the intended stimulative effect on sales activity going forward."
"Today's report confirms that home builders and buyers were in something of a holding pattern in early November as the anticipated expiration of the tax credit drew near and congressional action had not yet taken place to address this," confirmed NAHB Chief Economist David Crowe. "Meanwhile, the challenges that builders are facing in obtaining credit for new housing production and appropriate appraisal values for their homes continued to worsen. These issues still present a very worrisome problem that is weighing down prospects for a sustained housing market recovery."
In a special questions section of the HMI survey, fully one-third of respondents indicated that they have recently lost sales due to low appraisal values. This is up from a quarter of respondents who indicated as much in a survey taken in July. Builders report that low appraisal values are often tied to the use of foreclosed and distressed properties as "comps" in the appraisal process.
Derived from a monthly survey that NAHB has been conducting for nearly 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
The November HMI was unchanged from October's downwardly revised level of 17. The component gauging current sales conditions and the component gauging traffic of prospective buyers also remained unchanged, at 17 and 13, respectively, while the component gauging sales expectations for the next six months edged up two points, to 28.
On a regional basis, HMI results were somewhat mixed in November. The South recorded no change, at 17, while the Midwest posted a three-point decline to 14, the Northeast registered a six-point decline to 19 and the West bounced back five points from a big dip in October to finish at 19.
For more information, visit www.nahb.org/hmi.