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U.S. Homebuilder Confidence Unexpectedly Fell in June (Update1)
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By Shobhana Chandra
June 15 (Bloomberg) -- Confidence among U.S. homebuilders fell unexpectedly in June, indicating that a recovery from the housing slump will be slow to develop.
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today. A reading below 50 means most respondents view conditions as poor.
Builders from Hovnanian Enterprises Inc. to Toll Brothers Inc. continue to report losses as foreclosures mount, worsening the glut of unsold properties and driving down prices at the same time that borrowing costs are rising. Still, other reports show demand is starting to stabilize, which may eventually help residential construction become less of a drag on the economy.
âThe housing recovery will be fairly modest and gradual,â said James OâSullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, one of two economists in the Bloomberg survey to accurately forecast the homebuilder index. Rising mortgage rates, increases in household savings and the lingering effects of the credit crunch will hinder a recovery, he said.
The Standard and Poorâs Supercomposite Homebuilding Index fell 2.5 percent to 202.48 at 1:40 p.m. in New York. The gauge has fallen 4.4 percent since the start of this year.
The builder confidence index was forecast to increase to 17 this month, according to the median estimate of 40 economists surveyed by Bloomberg News. Projections ranged from 15 to 20.
Index Details
The index, which fell to a record low of 8 in January, averaged 16 in 2008. It was first published in January 1985.
The confidence survey asks builders to characterize current sales as âgood,â âfairâ or âpoorâ and to gauge prospective buyersâ traffic. It also asks participants to gauge the outlook for the next six months.
The builder groupâs index of current single-family home sales held at 14 for a second month. The gauge of buyer traffic stayed at 13 for the third straight time. A measure of sales expectations for the next six months dropped to 26 from 27, the first decrease since February.
âThe housing market continues to bump along trying to find a bottom,â David Crowe, chief economist at NAHB, said in a statement. âBuilders are taking their cue from consumers, who remain uncertain about the economy and their own situation.â
Builder confidence fell in the South, the countryâs largest housing market, sliding to 15 this month from 18 in May. It gained in the remaining three regions, led by the West, where it rose to 14 from 12. The Northeast increased to 20 from 19, while the Midwest showed a gain to 15 from 14.
Borrowing Costs
While rising unemployment is keeping buyers cautious, home sales may be past the worst declines. Figures from the National Association of Realtors showed the number of Americans signing contracts to buy previously owned homes rose 6.7 percent in April, the fourth increase in five months.
Meanwhile, borrowing costs are climbing from record-low levels. The average rate on a 30-year home loan surged to 5.57 percent in the week ended June 5, the highest since November, according to the Mortgage Bankers Association.
Mortgage delinquencies and foreclosure rates in the first quarter rose to the highest level since records began in 1972, figures from the mortgage bankers group showed in May.
Toll Brothers, the largest luxury homebuilder, and Hovnanian, New Jerseyâs biggest builder, this month reported quarterly losses as revenue plunged. Still, both businesses narrowed their losses from a year earlier.
âWith interest rates near historic lows and housing affordability near historic highs, it appears that some buyers are beginning to re-enter the new-home market,â Robert Toll, chairman and chief executive officer of Toll, said in a June 3 statement.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Last Updated: June 15, 2009 13:51 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSGFRjuouGCU
U.S. Homebuilder Confidence Unexpectedly Fell in June (Update1)
Share | Email | Print | A A A
By Shobhana Chandra
June 15 (Bloomberg) -- Confidence among U.S. homebuilders fell unexpectedly in June, indicating that a recovery from the housing slump will be slow to develop.
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today. A reading below 50 means most respondents view conditions as poor.
Builders from Hovnanian Enterprises Inc. to Toll Brothers Inc. continue to report losses as foreclosures mount, worsening the glut of unsold properties and driving down prices at the same time that borrowing costs are rising. Still, other reports show demand is starting to stabilize, which may eventually help residential construction become less of a drag on the economy.
âThe housing recovery will be fairly modest and gradual,â said James OâSullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, one of two economists in the Bloomberg survey to accurately forecast the homebuilder index. Rising mortgage rates, increases in household savings and the lingering effects of the credit crunch will hinder a recovery, he said.
The Standard and Poorâs Supercomposite Homebuilding Index fell 2.5 percent to 202.48 at 1:40 p.m. in New York. The gauge has fallen 4.4 percent since the start of this year.
The builder confidence index was forecast to increase to 17 this month, according to the median estimate of 40 economists surveyed by Bloomberg News. Projections ranged from 15 to 20.
Index Details
The index, which fell to a record low of 8 in January, averaged 16 in 2008. It was first published in January 1985.
The confidence survey asks builders to characterize current sales as âgood,â âfairâ or âpoorâ and to gauge prospective buyersâ traffic. It also asks participants to gauge the outlook for the next six months.
The builder groupâs index of current single-family home sales held at 14 for a second month. The gauge of buyer traffic stayed at 13 for the third straight time. A measure of sales expectations for the next six months dropped to 26 from 27, the first decrease since February.
âThe housing market continues to bump along trying to find a bottom,â David Crowe, chief economist at NAHB, said in a statement. âBuilders are taking their cue from consumers, who remain uncertain about the economy and their own situation.â
Builder confidence fell in the South, the countryâs largest housing market, sliding to 15 this month from 18 in May. It gained in the remaining three regions, led by the West, where it rose to 14 from 12. The Northeast increased to 20 from 19, while the Midwest showed a gain to 15 from 14.
Borrowing Costs
While rising unemployment is keeping buyers cautious, home sales may be past the worst declines. Figures from the National Association of Realtors showed the number of Americans signing contracts to buy previously owned homes rose 6.7 percent in April, the fourth increase in five months.
Meanwhile, borrowing costs are climbing from record-low levels. The average rate on a 30-year home loan surged to 5.57 percent in the week ended June 5, the highest since November, according to the Mortgage Bankers Association.
Mortgage delinquencies and foreclosure rates in the first quarter rose to the highest level since records began in 1972, figures from the mortgage bankers group showed in May.
Toll Brothers, the largest luxury homebuilder, and Hovnanian, New Jerseyâs biggest builder, this month reported quarterly losses as revenue plunged. Still, both businesses narrowed their losses from a year earlier.
âWith interest rates near historic lows and housing affordability near historic highs, it appears that some buyers are beginning to re-enter the new-home market,â Robert Toll, chairman and chief executive officer of Toll, said in a June 3 statement.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Last Updated: June 15, 2009 13:51 EDT
