The NAHB Wells Fargo Housing Market Index held steady at 13, far below a reading of 50 which would indicate that builders are neither confidence nor pessimistic about their industry.
(click chart to enlarge)
"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."
"The stall in the nation's housing market continues," agreed NAHB Chief Economist David Crowe. "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."
The index hit an all-time low of 8 back in January 2009 and entered into an upward trend that lasted over a year, peaking at 22 in April when potential buyers were enticed off the sidelines by the government’s tax credit.
Mounting evidence now suggests the credit appears to have done little more than whipsaw the market by forcing sales sharply higher in the spring while leaving far fewer active participants in the months that followed.
The latest data suggest that housing starts, and by proxy, new housing sales (less than 10% of the market) are stabilizing at a low level.
Confidence and sales highly correlated
The chart below, which goes back to 1985, shows how builder confidence (in blue) has tracked new single-family starts (in red).
(click chart to enlarge)
Given the close correlation, it is easy to see that builders have a good feel for what's happening in their market, and there isn't much to be optimistic about in the near term.
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