Pleasanton Weekly

Real Estate - August 26, 2011

Builders' confidence level unchanged in August

41% say they have lost sales contracts due to buyers' problems

by Jeb Bing

Builder confidence in the market for newly built, single-family homes held unchanged at a low level of 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released this week.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders and a home builder from Reno.

He noted that 41% of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.

"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said NAHB Chief Economist David Crowe.

"While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."

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 from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12.

However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.

Regionally, the HMI results were mixed in August. While the Northeast posted a four-point gain to 19, the West registered a one-point gain to 15, the South held even at 17 and the Midwest posted a two-point decline, to 10.

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