Housing Perspective: December Home Builder Sentiment
By RYAN TAYLOR
It’s still a lousy time to be selling new homes.
The National Association of Home Builders, or NAHB, shared its sentiment index for December, which remained at a record low of 9. The index is based on 426 residential developers nationwide; a reading below 50 reflects negative sentiment. In addition to the general index number, confidence levels for current sales dropped to 8 from a reading of 9 last month. The six-month sales forecast dropped from 18 to 16. To say confidence remains extremely low is a bit of an understatement.
The NAHB sentiment index number is an important gauge of the health of the overall market. In many of the hardest hit areas of the country, there remains a glut of housing supply - particularly new construction. Homebuilders are aggressively cutting prices, which is adding to existing downward pressure on prices caused by foreclosures. Since new homes are often more desirable than existing homes, watch any strength in homebuilder sentiment as a prelude to possible strength in the broader market.
While many prognosticators are starting to believe we’re moving into a bottoming phase in the housing market, the chief economist of the NAHB, David Crowe, remains unconvinced:
“We have seen no improvement over the past month in terms of sales conditions for new homes. In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence.”
The sobering reality of the housing market is that its recovery has been postponed due to the global recession and the resulting job losses. Despite aggressive moves by the Treasury Department and Federal Reserve to lower interest rates and spur demand, people without jobs simply do not buy houses.
Tags: Bay Area, bottom, FED, homebuilder, Housing, NAHB, sentiment, treasury
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