Builders and Consumers in a Pessimistic Mood

Chart: NAHB/Wells Fargo Housing Market Index (HMI) and New Single-Family. Courtesy of NAHB/Wells Fargo

Conducted and released before the June housing starts and building permits numbers were reported, July's NAHB/Wells Fargo Housing Market Index (HMI) fell to 14, down from 16 in June. This indicates that builders see little grounds for optimism at the present time. Expiration of the home buyer tax credit, ongoing competition from foreclosed properties and short sales and difficulty in obtaining AD&C credit all contributed to the downbeat mood of the builders surveyed by NAHB.

Traces of rising optimism were found in the Northeast and the Midwest where the index rose, albeit to levels that remained low. The improvement was supported by an increase in June's single-family building permits for the two regions.

At the same time, slipping building confidence in the South was matched by a drop in the region's permits. The HMI for the West also indicated an erosion of confidence.

Meanwhile, portraying gloomier consumers, the University of Michigan's Consumer Sentiment Index dropped to 66.5 in July from June's 76. Beneath the surface there was positive news for housing, with 76 percent of the households surveyed believing that now is a good time to purchase a house, the second highest reading over the past 14 months and only one percentage point below the peak level for this period. Further improvement in the economy may enable more households to act on this belief.

- Courtesy of NAHB