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UNTIL 1:00 PM, MONDAY, JUNE 19
CONTACT: Donna Reichle
202-266-8473
dreichle@nahb.com www.nahb.org
WASHINGTON, June 19 - Rising mortgage rates, deepening
affordability issues and the retreat of investors/speculators from the
marketplace have prompted single-family home builders to further
adjust their perspectives on the new-home market, according to
the National Association of Home Builders/Wells Fargo Housing
Market Index (HMI) for June, released today. The HMI declined four
points from an upwardly revised reading in the previous month to
hit 42 for the latest report, its lowest mark since April 1995.
"Based on historical experience, particularly the 1994-95
episode, the pronounced pattern of movement in the HMI is not
inconsistent with the reasonably orderly cooling-down process we're
projecting for home sales and single-family housing starts in 2006,"
said NAHB Chief Economist David Seiders. "We now expect new-home
sales to be off by 13 percent from the record posted in 2005.
Single-family starts, supported by large builder backlogs of
unfilled orders and some continuing reconstruction in the wake of
last year's hurricanes, should be down by about 9 percent from the
2005 record."
"These forecasts naturally are subject to a considerable degree
of risk," added Seiders. "The downside risks include the
potential for large numbers of sales cancellations and re-sales by the
investor/speculator group as well as more aggressive tightening
of monetary policy than we're assuming in our baseline
forecast."
"Looking at today's numbers, it's important to keep one thing in
perspective," added NAHB President David Pressly, a home builder
from Statesville, N.C. "The HMI is a measure of builder
sentiment - and attitudes may vary by a greater degree than actual
market activity."
Derived from a monthly survey that NAHB has been conducting for
close to 20 years, the NAHB/Wells Fargo HMI 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
either "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.
All three component indexes declined in June, falling to their
lowest levels since early 1995. The index gauging current sales
was down three points to 47, while the index gauging sales
expectations for the next six months fell five points to 50 and the
index gauging traffic of prospective buyers declined four points,
to 29.
The decline in builder confidence was broad-based and registered
in every region this month. The HMI fell seven points to 40 in
the Northeast, four points to 25 in the Midwest, two points to 49
in the South and one point to 61 in the West. These regional
indexes are all down by similar amounts from their 1995 highs, and
the relatively low levels for the Midwest and Northeast reflect
relatively weak economic conditions in those parts of the
country.
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