Housing Market Index unchanged for fourth month

The Housing Market Index, which measures builder confidence, held steady at 16 for the fourth consecutive month.  A reading of 50 suggests builders are neither optimistic nor pessimistic.



Complied by the National Association of Home Builders/Wells Fargo, components that gauge current sales and sales over the next six months did move up slightly from depressed levels, but traffic remained unchanged.

"While builders are starting to see more interest among potential home buyers, we are also dealing with a multitude of challenges, including competition from foreclosure properties and inaccurate appraisals of new homes, which are limiting our ability to sell," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nevada.

"On top of that, an extremely tight lending environment continues to make it almost impossible to obtain credit for viable new and existing projects, and most do not see that situation improving anytime soon."

Tight lending standards have been a problem for many businesses over the past couple of years, while competition from foreclosed properties remains a problem, offsetting any tailwind from tight inventories (see chart below).



The inability of some buyers to sell their current homes is also hurting builder confidence and limiting sales.

Mortgage rates remain near historic lows and affordability is near a record high. But until the economy begins to produce a significant number of new jobs, a strong foundation under the housing market is likely to remain elusive.