The Housing Market Index, which measures the confidence (or lack of) among new home builders, fell from 16 in May, where is has held for six of seven months, to 13 in June. A reading of 50 suggests builders are neither optimistic nor pessimistic; hence, the extremely low reading highlights the difficult environment builders are struggling with.
Adding to the woes for builders, the survey also picked up a drop in traffic – 14 to 12 – as potential buyers remain extremely cautious.
NAHB Chairman Bob Nielsen commented that builders are still be squeezed by “continuing weakness in existing-home prices – against which they must compete.”
It’s not only distressed sales that are depressing prices and stiffening the competition builders are facing, tough lending standards, difficulty in selling existing homes and uncertainty in the economy are all playing a part in keeping up the pressure on the market.
Mortgage rates remain near historically low levels, but low-cost financing appears to have done little to entice reluctant buyers.
A self-sustaining recovery, stronger job creation and stability in housing prices would go a long way in establishing a firm foundation under the market.
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