NAHB: Builder Sentiment at Historic Lows in February

The NAHB/Wells Fargo Housing Market Index indicates builders see no improvement in market for new, single-family homes.

February 17, 2009

WASHINGTON, Feb. 17 - The National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today, held in the single digits for a fourth consecutive month in February. The HMI rose a single point to 9 - virtually unchanged from an all-time record low in the previous month - indicating that home builders have seen essentially no improvement in the market for new, single-family homes.

"Clearly, the market for new single-family homes remains very weak at this time," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "However, looking forward, we are certainly hopeful that the newly passed economic stimulus bill, which includes some favorable elements for first-time home buyers and small businesses, will have a positive impact that will help get housing and the economy back on track."

Provisions within the overall stimulus package that should help stimulate demand for housing and otherwise bolster the housing sector include a new and improved, $8,000 first-time home buyer tax credit; an extension of 2008 FHA, Fannie Mae and Freddie Mac loan limits for high-cost areas through the end of this year; an expansion of the net operating loss carry back period from two years to five for small businesses; and other tax elements relating to energy-efficient and low-income housing programs.

"Home builders are especially concerned about the continually rising number of foreclosures and short sales, which are flooding the market with excess inventory and undermining overall home values," noted NAHB Chief Economist David Crowe. "This is one reason that home builder expectations for the next six months declined in the February HMI even though traffic of prospective buyers has improved somewhat and present sales conditions were basically unchanged. We are therefore looking forward to working with the Treasury Department as details of its plan to address the urgent foreclosure problem emerge."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI 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.

Two out of three of the HMI's component indexes gained a bit of ground in February, with the index gauging current sales conditions rising a single point to 7 and the index gauging traffic of prospective buyers rising three points to 11. Meanwhile, the index gauging sales expectations in the next six months fell two points to a new record low of 15.

Regionally, the HMI rose a single point in both the South and West, to 12, and 5, respectively, in February. The Midwest posted a two-point gain, to 8, and the Northeast registered a one-point decline, to 9.

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