With the expiration date for a home buyer incentive approaching, builder confidence in the market for newly built,
single-family homes slipped one point to 18 in October, according to the latest National Association of Home Builders/Wells
Fargo Housing Market Index (HMI).
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
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.
“It comes as no surprise that after trending
upward from an historic low in January, the HMI’s positive momentum now appears to have stalled,” said Joe Robson,
chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, OK.
“This is the first time since November of 2008 that all three component indexes of the HMI have declined,”
said 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.”
Crowe noted that immediate congressional action
to extend the tax credit and expand its eligibility beyond first-time buyers could substantially boost sales activity. “In
a special questions section of our HMI survey, 85 percent of respondents said that expansion of the tax credit would have
a positive impact on their sales,” he said. “That would amount to a very effective stimulus to housing demand
and a needed boost to the overall economy.”
Derived from a monthly survey that NAHB has
been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family
home sales and sales expectations for the next six months as “good,” “fair” or “poor.”
The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average”
or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any
number over 50 indicates that more builders view sales conditions as good than poor.