US home builders show little hope for housing recovery - survey

16 November 2010 19:10  [Source: ICIS news]

WASHINGTON (ICIS)--US home builders showed little or no improvement in November in their expectations for a housing sector recovery, according to survey data issued on Tuesday, with contractors’ confidence levels still near record lows.

The National Association of Home Builders (NAHB) said that its housing market index (HMI) was at 16 in November, the same level initially reported for the index in October.

The association said that its index reading of 16 for October was revised downward to 15. Consequently, the builders’ trade group said it considered the November measure of 16 a slight improvement.

On a scale of 1-100, the housing market index measures home builders’ responses to questions about their current sales of single-family homes, the number of prospective buyers visiting their housing developments or model homes, and their expectations for sales over the next six months.

A reading of 50 or above indicates that home builders are confident about their prospects over the next six months.

The 20-year-old index hit an all-time low of 8 in January 2009, a significant and unprecedented decline from index numbers that held steady in the mid 60s and even reached 70 at times during the housing boom years of 2002-2005.

The HMI climbed back to readings of 19 and 22 in April and May this year when the US government was offering an $8,000 (€5,920) tax credit to home buyers. But when that stimulus measure and its carry-over effect evaporated after May, the index nose-dived again.

The US housing industry - especially construction of single-family homes - is a key downstream consuming sector for chemicals and resins.

According to the American Chemistry Council (ACC), each new single-family residence is said to account for some $16,000 in chemicals or derivative products such as plastic pipe, adhesives, insulation, roofing materials, synthetic fibres, paints, coatings and adhesives, among others.

However, NAHB chairman Bob Jones said that November’s index reading did show some modestly encouraging results.

“Though the gains have been incremental, the fact that builder confidence has improved over the past two months is encouraging,” Jones said.

“Many builders are reporting that while the quantity of buyer traffic through their model homes has not improved dramatically, the quality of that traffic seems to be getting better,” he said, “meaning that more people appear to be serious about buying in the near future.

But home builders remain very concerned, he said, about the lack of available financing for new home construction. “You can’t sell what you can’t build,” he said.

NAHB chief economist David Crowe also noted that “the most concerning aspect of the [November HMI] report is that survey participants say they have observed absolutely no improvement in their ability to access credit to build viable new projects”.

“This problem is clearly a roadblock to recovery in many markets,” Crowe said.

The NAHB survey results followed a report issued earlier on Tuesday by a US congressional panel, warning that the entire housing market may be threatened with collapse due to ongoing uncertainty about foreclosure proceedings.

($1 = €0.74)

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