Housing Perspective: January Home Builder Sentiment
By RYAN TAYLOR
Just when you thought the market for new homes couldn’t get any worse, it did.
The National Association of Home Builders (NAHB)/Wells Fargo January builder sentiment index dropped to 8 from 9. While the homebuilders were setting records for new home sales in 2005 and 2006, they’re now setting records for the lowest confidence on record, as 8 breaks last month’s record low of 9.
The homebuilders are very clear on what needs to happen to bring back their confidence and revive the market for new homes (Hint: It has nothing to do with building homes that people want to live in for the right price.)
“Conditions in the nation’s housing market aren’t getting any better, and they aren’t going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market.” NAHB Chairman Sandy Dunn said.
One of the biggest reasons we are in this housing crisis is that builders put millions of buyers in homes they couldn’t afford. Through questionable relationships and kickbacks, builders partnered with lenders to encourage buyers to stretch beyond their means. This common practice during the boom created a massive over-supply of homes which has yet to be worked through.
As a result, homebuilders are left with basically two choices – 1) offer homes at prices that are reflective of the current market conditions or 2) do not sell any homes and plead for Uncle Sam to help them.
Needless to say, they’re not going for option number one because it will put most of them out of business. Furthermore, the NAHB seems delusional on why people are not buying their homes.
“Qualified buyers are clearly in the wings but they’re looking for a significant signal from the federal government that now is the time to return to the market” NAHB Chief Economist David Crowe said.
This statement makes the assumption that qualified buyers are not in the new home market because the government needs to give them some kind of divine signal to know when to buy. As an alternative explanation, I think qualified buyers are not buying new homes because they’re far away from job centers, listed above market and were built by companies that frequently stop work on projects halfway through– existing residents be damned.
Until one of the major publicly traded home builders goes out of business, we are not near the bottom in the housing cycle.
Tags: bottom, community, homebuilder, Housing, index, NAHB, sentiment, Wells
January 29th, 2009 at 4:22 pm
[...] As I have written previously, there will be no bottom in the housing market — or even meaningful stabilization — until at least one, if not more of the major homebuilders goes under. The alternative, which would dramatically extend any future recovery, would be an auto industry-style bailout. [...]