US homebuilder confidence rises in Oct, but still low

18 October 2010 21:35  [Source: ICIS news]

WASHINGTON (ICIS)--US home construction contractors are moderately more confident about the long-suffering housing market, a leading trade group said on Monday, but builder expectations remain near record lows.

The National Association of Home Builders (NAHB) said that its monthly survey of builders’ confidence in the market for new single-family homes rose three points in October to 16 from the September reading of 13, the first gain in five months.

However, the housing market index (HMI) compares with the record low of 9 recorded in November and December last year and was still below the 19 and 22 readings seen in April and May this year.

A federal tax credit for home buyers expired at the end of April, and housing starts, home sales and builder confidence have plummeted anew since then.

“The new home market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer,” said association chief economist David Crowe.

Crowe said that while home builders still face market problems such as continuing high foreclosure rates, tight credit and consumer uncertainty about the economy and jobs, “builders have seen a slight increase in consumers who are considering a home purchase”.

That slight increase in part may be due to record-low mortgage interest rates.

The health of the US housing industry is a concern for chemical manufacturers because home construction is a major downstream consuming sector for a broad range of chemicals, resins and derivative products.

An HMI reading of 50 or higher means that a majority of builders are confident about prospects for new home construction work.

The index, conducted since 1985 by the association with the help of Wells Fargo Bank, was last above 50 in April 2006 (51) when the housing market collapse was accelerating.

During the peak years of the US home construction boom, 2002-2005, the HMI held steady in 60-70 range and hit its last peak of 72 in June 2005.

But the October survey of builder confidence was completed in the first week of the month, according to an association spokesperson, and consequently does not reflect possible impact of the new crisis in foreclosure processing that errupted in the second week.

Last week several major US mortgage lenders froze their loan foreclosures because of revelations that eviction orders had not been properly vetted, lacked adequate documentation or failed to meet state regulatory requirements.

All 50 US states have announced investigations into the mortgage lending and foreclosure practices of banks, and state and federal legislators and regulators have called for a nationwide freeze on foreclosures.

The crisis has the potential to effectively chill the whole housing market until regulators and banking officials can sort out the problems, a process that some observers fear could take many months and further delay what some had hoped was a nascent housing recovery.

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