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Builder Caution Reflects Fragile Housing Market in June

Builder Caution Reflects Fragile Housing Market in June

Residential News » Residential Real Estate Edition | By Michael Gerrity | June 16, 2009 8:00 AM ET



(News Source : National Association of Home Builders)

(WASHINGTON, D.C.) -- Indicating that single-family home builders remain cautious and concerned about the fragile state of today's economy and housing market, the National Association of Home Builders / Wells Fargo Housing Market Index (HMI) declined one point to 15 in June.

"The outlook for home sales has improved somewhat in recent months, due largely to implementation of the first-time home buyer tax credit and gains in housing affordability," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "However, looking forward, home builders are facing a few headwinds, including expiration of the tax credit at the end of November; a recent upturn in interest rates; and especially the continuing lack of credit for housing production loans."

"As expected, the housing market continues to bump along trying to find a bottom," said NAHB Chief Economist David Crowe. "Meanwhile, builders are taking their cue from consumers, who remain uncertain about the economy and their own situation. Builders are also finding it difficult to complete a sale because customers cannot sell their existing homes."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI 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 conditions as good than poor.

Two out of three of the HMI's component indexes were unchanged in June, including the index gauging current home sales, which held at 14, and the index gauging traffic of prospective buyers, which held at 13. Meanwhile, the index gauging expectations for the next six months declined a single point, to 26.

Regionally, the decline was entirely focused in the South, which is the nation's largest housing market. There, the HMI declined 3 points to 15, while the rest of the regions posted gains. The Northeast had a one-point gain to 20, the Midwest, a one-point gain to 15, and the West, a two-point gain to 14.




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