As Builder Confidence Plunges, NAHB Dials 911
Builder confidence fell like a rock off of already historic lows during November, according to the National Association of Home Builders/Wells Fargo Housing Market Index, released Tuesday afternoon; the index tracks market sentiment among key home builders. The reason for the sharp drop, however, is really more simple than some might think: very few consumers are looking to buy new homes, those that might be inclined to buy are increasingly losing their jobs, and whomever is left over that actually does want to buy a new home is having troubled getting the financing needed to do so. Builders now seem to be coming to terms with that sort of bleak reality. As a result, the HMI sank five points to 9 -- NINE! -- the lowest level recorded since the series was created in January of 1985, the NAHB said in a press statement. The HMI would need to be over 50 to indicate "good" market conditions. Not surprisingly, the dismal result led the builders' association, many of whose dues-paying members are likely rightly worried about their immediate futures, to urgently push Congress to do something. "Today's report shows that we are in a crisis situation. If there's any hope of turning this economy around, Congress and the Administration need to focus on stabilizing housing," said NAHB Chairman Sandy Dunn. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back. Beyond the work that is being done to help reduce foreclosures, Congress must immediately incorporate such incentives for qualified buyers in a new economic recovery package." Of course, the builders have already been pushing for carrots to entice borrowers -- from increasing conforming lending limits to implementing a tax credit for first-time homebuyers earlier this year. The problem, of course, is that none of the efforts so far have worked. The solution? More must be done, NAHB cheif economist David Crowe said. "The housing downturn has already cost America three million jobs in construction and related industries, and this downward momentum cannot be stemmed without substantive government intervention," he argued. "Congress should consider significant consumer incentives such as expanding the first-time home buyer tax credit and providing a government buy-down of mortgage interest rates for home purchasers. Both policies were successfully combined in the '70s to stimulate home buyer demand, and could get housing and the national economy moving again." Plenty of critics, however, argue that the reason buyers are staying away from new homes is simply a matter of oversupply -- and that no amount of reasonable stimulus will drive activity in the short-term. At least, not the kind of homeownership that would be sustainable. "We have near-historical highs in new-home inventory," said one industry analyst, that asked not to be indentified. "Pushing people to buy by subsidizing mortgage rates or offering up a huge tax credit that essentially serves to keep home prices inflated hardly seems like a sustainable strategy that solves this problem." The NAHB is one of the largest sources of lobbying dollars on Capitol Hill, however; and is one of the more powerful political forces in determining policy stances towards U.S. real estate. Two out of three of the HMI's component indexes declined in November, the NAHB said. The index gauging current sales conditions fell six points to 8, which was a new record low. Likewise, the index gauging traffic of prospective buyers fell four points to 7 -- also a record low. Meanwhile, the index gauging sales expectations in the next six months held firm from the previous month at its record low of 19. Every region posted declines in builder confidence in November. The Northeast, South and West each registered five-point declines to 11, 11 and 6, respectively, while the Midwest registered a six-point decline to 7. Write to Paul Jackson at email@example.com.