US home builder confidence sinks to 17-month low

16 August 2010 18:12  [Source: ICIS news]

WASHINGTON (ICIS)--US home builders are increasingly less confident of any near-term recovery in the crucial housing sector, a leading trade group said on Monday, with sales expectations among housing contractors falling to a 17-month low.

The National Association of Home Builders (NAHB) said that its monthly survey of housing contractors, known as the housing market index (HMI), fell by one point in August to 13, its lowest level since March 2009.

It is the third straight month of declines in the index, the association noted, and the August fall-off accelerates a sharp departure from builder confidence that was strongly positive as recently as May.

In May, the NAHB’s housing market index had climbed to 22 - the highest score since August 2007 - and builders were more confident of a recovery than they had been in two years.

In the May index survey, home builders expressed confidence that housing demand, construction and sales would show gains over the next six months.

But in what amounts to a reversal of those recent expectations, the association said contractors “are expressing the same concerns that they are hearing from consumers, particularly the sense that the overall economy and job market aren’t gaining any traction”.

NAHB chairman Bob Jones said that the association’s member companies are reporting continuing problems with competition from the large number of foreclosed homes on the market and continuing tight lending conditions for potential home buyers.

The US housing industry, especially construction of single-family homes, is a major downstream consuming sector for a broad range of chemicals, plastic resins and derivative products.

Despite the dour mood of housing contractors, the association’s chief economist, David Crowe, said that the NAHB still expects that the home building market will improve in months ahead.

“NAHB continues to project that modest job gains, historically low mortgage rates and pent-up demand will ensure a better housing market in the second half of 2010 than in the first half,” Crowe said.

However, the decline in home builder confidence comes amid other negative indicators for the housing sector in particular and the US economic recovery in general.

US pending sales of existing homes fell by 2.6% in June from May, and housing sales completions were off in June as well while new home sales remained near record-low levels.

The nation saw 131,000 job losses in July, and industry officials said that the broad US manufacturing sector might take six years to recover from the recession.

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