The NAHB released its Housing Market Index measure of home builder confidence today, which showed that confidence among builders has fallen to a 16-year low:
With a reading of 28, the HMI now is at the lowest level in its current cycle and has reached the lowest point since February 1991. â€œBuilders continue to report serious impacts of tighter lending standards on current home sales as well as cancellations, and they continue to trim prices and offer a variety of nonprice incentives to work down sizeable inventory positions,â€? said NAHB President Brian Catalde, a home builder from El Segundo, California.
The NAHB has become increasingly bearish on housing in the last two months, saying in May it expected a housing recovery “late in the year.” Now? Even more bullish — no recovery until 2008, and a prediction of housing’s drag on the overall economy:
â€œIt’s clear that the crisis in the subprime sector has prompted tighter lending standards in much of the mortgage market, and interest rates on prime-quality home mortgages have moved up considerably during the past month along with long-term Treasury rates,â€? added NAHB Chief Economist David Seiders. â€œHome sales most likely will erode somewhat further in the months ahead and improvements in housing starts probably will not be recorded until early next year. As a result, we expect housing to exert a drag on economic growth during the balance of 2007.â€?
You know if the builders are getting bearish, things aren’t looking too good.