The Real Estate Bloggers

15 Month Low For The Home Builder Index in July 2010

Posted: 19 Jul 2010 07:25 AM PDT

Construction-house Nationally 14 out of a hundred home builders surveyed by NAHB think that the new home market is doing okay. My question is, what do that 14 percent of homebuilders know or do they need to be drug tested?

But to be honest, there is some logic to the survey. After the expiration of the new home buyer tax credit, demand in the parts of the country that has lower cost housing has fallen off the cliff. So builders in the South and the West both saw their confidence numbers drop 5 points each. Meanwhile in the Northeast home builders saw their confidence rise as the tax credit was not as crucial to getting deals done up there due to the higher housing prices.

However, the industry is still in a bad place. With historically low interest rates builders should be building like crazy and buyers should be chomping at the bit to get into a home at these low rates. But with the foreclosures working their way through the system, the economy in the pits, and economic confidence at it’s bottom, no one is thinking of buying new homes right now.

When things do turn around the builders will then be facing higher interest rates as keeping them this low is too expensive for the government in good times. It is going to be a rough path for the builders in the future.

“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” said David Crowe, chief economist for the builders’ advocacy and lobbying group.

The decline in the builders’ index in July “reflects a number of underlying market conditions that builders are seeing, including hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction,” Crowe said.

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15 Month Low For The Home Builder Index in July 2010