PrintWith the expiration date for the first-time homebuyer tax credit approaching, builder confidence in the market for newly built, single-family homes slipped one point to 18 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
”It comes as no surprise that after trending upward from an historic low in January, the HMI’s positive momentum now appears to have stalled,” said Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “Our economists have repeatedly warned that the approaching expiration of the $8,000 home buyer tax credit on Nov. 30, combined with the massive hurdles that builders face in obtaining construction financing and appropriate appraisals on new homes, could derail the fragile recovery in housing just as it is starting to take shape.
”Congressional action to expand the tax credit and extend it for one year would provide a critically needed boost to the employment market and economy, generating nearly 350,000 jobs, $28.2 billion in wages, salaries and business income and $11.6 billion in additional tax revenues. That’s an opportunity we can’t afford to pass up at this difficult time.”
”This is the first time since November of 2008 that all three component indexes of the HMI have declined,” noted NAHB Chief Economist David Crowe. “Clearly, builders are experiencing the effects of the expiring tax credit on their sales activity, since it would be virtually impossible at this point to complete a new home sale in time to take advantage of that buyer incentive before Nov. 30.”
On the flip side of the coin, Crowe noted that immediate congressional action to extend the tax credit and expand its eligibility beyond first-time buyers could substantially boost sales activity. “In a special questions section of our HMI survey, 85 percent of respondents said that expansion of the tax credit would have a positive impact on their sales,” he said. “That would amount to a very effective stimulus to housing demand and a needed boost to the overall economy.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index 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.
Each of the HMI’s component indexes recorded declines in October. The component gauging current sales conditions fell one point to 17, while the component gauging sales expectations for the next six months declined two points to 27 and the component gauging traffic of prospective buyers fell three points to 14.
On a regional basis, the Northeast was the only part of the country to record an improvement in its HMI score, with a one-point gain to 25. Meanwhile, the Midwest and South each recorded one-point declines to 18 and the West recorded a four-point decline to 14.
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