Builders' confidence falls to 11-year low
Contractors have negative outlook on market for first time since late 2001
American Track Home
By Rex Nutting, MarketWatch
May 15, 2006
WASHINGTON (MarketWatch) -- U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday.
The NAHB/Wells Fargo housing market index, a builders' sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is "poor" than say it's "good."
The index has fallen 23 points in the last seven months. A year ago, the index was at 70.
"Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace are prompting single-family home builders to further adjust their perspective" on the market, the NAHB said in a press release.
The industry group expects new home sales to fall 12% this year from the record 1.28 million in 2005. They expect housing starts to fall about 7% from 2005's record 2.07 million.
The movement in the index is "not inconsistent with the orderly cooling-down process we're projecting," said David Seiders, chief economist for the builders.
Despite the sharp decline, builders are still more optimistic about sales over the next six months than they are of current sales.
In May, builders' assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of traffic of prospective buyers dropped to 32 from 39. All three subindexes were at their lowest levels since mid-1995.
Builders in the West remained the most confident, with the index falling eight points to 60. The index fell three points in the Northeast to 47, two points in the Midwest to 30, and six points in the South to 51.
On Tuesday, the Commerce Department will report on April housing starts. Economists are looking for a small increased to about 1.97 million annualized starts from 1.96 million in March. See Economic Calendar.
It used to be that the builders' index tracked housing starts quite closely, but the relationship has broken down in this decade. Starts have been much stronger than would be implied by the builders' index.
In a separate release Monday, the National Association of Realtors said sales of existing homes were down 2.1% in the first quarter from the same quarter a year earlier. Five of the once-hottest state markets cooled substantially. Meanwhile, median prices for existing homes sold in the first quarter were up 10.3% from the first quarter of 2005, down from a 13.6% increase in the fourth quarter. See full story.
Rex Nutting is Washington bureau chief of MarketWatch.
What Use to Be Thought of as the American Dream
American Track Home
By Rex Nutting, MarketWatch
May 15, 2006
WASHINGTON (MarketWatch) -- U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday.
The NAHB/Wells Fargo housing market index, a builders' sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is "poor" than say it's "good."
The index has fallen 23 points in the last seven months. A year ago, the index was at 70.
"Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace are prompting single-family home builders to further adjust their perspective" on the market, the NAHB said in a press release.
The industry group expects new home sales to fall 12% this year from the record 1.28 million in 2005. They expect housing starts to fall about 7% from 2005's record 2.07 million.
The movement in the index is "not inconsistent with the orderly cooling-down process we're projecting," said David Seiders, chief economist for the builders.
Despite the sharp decline, builders are still more optimistic about sales over the next six months than they are of current sales.
In May, builders' assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of traffic of prospective buyers dropped to 32 from 39. All three subindexes were at their lowest levels since mid-1995.
Builders in the West remained the most confident, with the index falling eight points to 60. The index fell three points in the Northeast to 47, two points in the Midwest to 30, and six points in the South to 51.
On Tuesday, the Commerce Department will report on April housing starts. Economists are looking for a small increased to about 1.97 million annualized starts from 1.96 million in March. See Economic Calendar.
It used to be that the builders' index tracked housing starts quite closely, but the relationship has broken down in this decade. Starts have been much stronger than would be implied by the builders' index.
In a separate release Monday, the National Association of Realtors said sales of existing homes were down 2.1% in the first quarter from the same quarter a year earlier. Five of the once-hottest state markets cooled substantially. Meanwhile, median prices for existing homes sold in the first quarter were up 10.3% from the first quarter of 2005, down from a 13.6% increase in the fourth quarter. See full story.
Rex Nutting is Washington bureau chief of MarketWatch.
What Use to Be Thought of as the American Dream
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