In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Monday, October 19, 2009

NAHB: Builder Confidence Decreases Slightly in October

by Calculated Risk on 10/19/2009 01:00:00 PM

Residential NAHB Housing Market Index Click on graph for larger image in new window.

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) decreased to 18 in October from 19 in September. The record low was 8 set in January. Note that Traffic of Prospective Buyers declined sharply.

This is still very low - and this is what I've expected - a long period of builder depression.

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

HMI and Starts Correlation This second graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the October release for the HMI and the August data for starts (September starts will be released tomorrow).

This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month. Those expecting a sharp rebound in starts are probably wrong.

Press release from the NAHB (added): Builder Confidence Slips in October

“This is the first time since November of 2008 that all three component indexes of the HMI have declined,” noted NAHB Chief Economist David Crowe. “Clearly, builders are experiencing the effects of the expiring tax credit on their sales activity, since it would be virtually impossible at this point to complete a new home sale in time to take advantage of that buyer incentive before Nov. 30.”
Each of the HMI’s component indexes recorded declines in October. The component gauging current sales conditions fell one point to 17, while the component gauging sales expectations for the next six months declined two points to 27 and the component gauging traffic of prospective buyers fell three points to 14.

On a regional basis, the Northeast was the only part of the country to record an improvement in its HMI score, with a one-point gain to 25. Meanwhile, the Midwest and South each recorded one-point declines to 18 and the West recorded a four-point decline to 14.