Home Builder Sentiment Remains at Record low

U.S. home builder sentiment held steady in December but remained at a record low as deepening economic turmoil, a deteriorating job market, and a flow of foreclosed homes on to the market continued to hurt sales conditions, an industry group said on Monday.

The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market Index was 9 in December, unchanged from November when it reached its lowest level on record since its launch in January 1985.

Readings below 50 indicate more builders view market conditions as poor than favorable. The December index was in line with expectations based on a Reuters survey of economists.

"This is suggestive of the continued decline that we have been seeing in new home sales, stubbornly high inventory levels and mounting foreclosures," said Michelle Meyer, an economist at Barclays Capital in New York.

"What is most surprising, however, is that home builders are not more optimistic about their outlook despite growing speculation of greater federal assistance for the housing market," she said.

The U.S. housing market is suffering the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.

"The crisis continues," NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, West Virginia, said in a statement.

"While builders are doing everything we can in the way of price and non-price incentives to move new homes off the books, buyers are afraid to move forward, and in any case there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures," she said.

Dunn said Congress and the administration must step in with substantial incentives to bring qualified buyers back to the table and effective foreclosure relief programs.

The gauge of current single-family homes sales fell to 8 from a revised 9. The index of sales expected in the next six months dropped to 16 from a revised 18. The prospective-buyer traffic measure was unchanged at 7, the group said.
HOME BUILDERS ARE HURTING

U.S. home builders, struggling under sinking demand and a credit crisis, have been facing off with a flood of homes in foreclosure.

Interest rates on mortgages have fallen sharply over the past month, a key development that could help turn the hard-hit housing sector around.

"Lower mortgages rates would be most helpful for the housing market at the moment," said Torsten Slok, senior economist at Deutsche Bank in New York.

Slok said there needs to be a boost in demand for housing before a significant improvement is seen.

"The housing market continues to crawl on the bottom and things will only gradually begin to get better in 2009," he said.

Home builders have curbed their new construction. They have also been offloading their inventories of unsold homes by slashing prices at the expense of profits to pay off their debt and keep afloat.

"We have seen no improvement over the past month in terms of sales conditions for new homes," NAHB Chief Economist David Crowe said in a statement.

"In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence," he said.

Crowe said at this point it will take definitive government action to stop the slide in home values and turn the tide of consumer sentiment.

"Expanding the first-time buyer tax credit and providing government action to reduce mortgage rates would go a long way toward arresting this downward spiral, just as a combination of similar moves worked in the 1970s to boost the housing market and economy," he said.

On a regional basis, the housing market index declined in two out of the four regions in December. The Midwest and South posted a one-point and a two-point decrease, to 6 and 10, respectively. The Northeast held even with the previous month's 11 reading. The West posted a one-point gain to 7 this month.

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