US home builder confidence lowest since 1991
Bloomberg News
Confidence among U.S. home builders fell more than forecast this month to the lowest since 1991, as cancellations and more restrictions on lending took a toll.
The National Association of Home Builders/Wells Fargo index of builder confidence declined to 22, from 24 in July, the Washington-based association said yesterday. A reading below 50 means most respondents view conditions as poor. The gauge has decreased for six consecutive months.
Mounting defaults on subprime mortgages are extending a slump in home building that is already the worst in 16 years, forcing real estate companies to slash prices and offer more incentives to buyers. Declines in residential construction will weigh on the economy until 2008, economists said.
“We’ve got further weakness to come,” said David Sloan, a senior economist at 4Cast Inc. in New York, who accurately predicted the drop. “The subprime crisis has given fresh momentum to the downtrend in the housing market.”
This month’s reading is the second weakest since the survey’s inception in 1985. It reached a record low of 20 in January 1991, when the housing market and the economy were both in recession.
A separate report from the National Association of Realtors yesterday showed the median price for a single-family home in the second quarter fell in 50 of 149 metropolitan areas. Home sales, including condominiums, decreased 11 per cent.
“It’s not a terribly encouraging sign,” David Seiders, chief economist of NAHB, said in an interview. “The markets are highly suspicious of risk at this point. Builders know all of this and are reacting to it.”
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