Designed to measure home builder sentiment, the survey showed that builder confidence fell from 17 in June to 14 in July, the second-consecutive decline and the lowest reading since April 2009.
A level of 50 suggests builders are neither confident nor pessimistic about the market, which signals that gains earlier in the year, though encouraging, reflect a new home market that is far from healthy.
It’s no surprise, in my view, that National Association of Home Builders Chief Economist David Crowe said, “"This month's lower HMI reflects a number of underlying market conditions that builders are seeing, including hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction."
However, he did concede that the pause in buying following the expiration of the tax credit is turning out to be “longer than anticipated” due to the sluggish pace of the recovery.
Crowe is cautiously optimistic, noting that “low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year.”
A quick comment on the final statement:
Thus far, record low mortgage rates and affordable prices have done little to inject confidence in the wake of the expired tax credit.
Pending home sales plunged in the latest month, and the weekly U.S. MBA Purchase Index, which did a great job in May foreshadowing the weakness in the housing market that was to come, continues to hover near a 14-year low.
Significant job creation and increased job security, a decline in foreclosures and a conviction among potential buyers that housing prices have stabilized or are even creeping higher are all part of the equation that will put a firm foundation under the still-troubled home market.
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