US home builders lower expectations in April, 1st drop in 7 months

16 April 2012 19:39  [Source: ICIS news]

WASHINGTON (ICIS)--US home builders had lower expectations for new housing construction and sales in April, a key survey said on Monday, with contractors reporting a decline in housing market confidence for the first time in seven months.

The National Association of Home Builders (NAHB) said that its monthly survey of member contractors showed a 3-point drop in the housing market index (HMI), edging down to an April score of 25 from the 28 reading in March.

The HMI is a compilation of three subsidiary measures: home builders’ current sales of single-family homes; the number of prospective home buyers visiting model homes; and contractors’ expectations for home sales over the next six months.

On the 1-100 HMI scale, a reading of 50 or above indicates that home builders are confident about their prospects over the next six months.

During the US housing boom years of 2002–2005, the housing market index had held steady in the mid-60s, and even reached the upper-70s at times.

At the bottom of the US 2008-2009 recession, the HMI hit an all-time low of 8 in January 2009. 

Since the US recession officially ended in June 2009, the HMI had remained at or below the 20 level until just recently, when it edged up to 21 last December, climbed to 25 in January this year and advanced to 28 for both February and March.

The April decline is the first in the index since September last year.

The new home construction sector is a key downstream consuming industry for chemicals and resins, driving demand for a wide variety of chemical products and derivatives such as plastic pipe, adhesives, insulation, roofing and siding materials, paints and coatings and synthetic fibres.

NAHB chief economist David Crowe said that renewed buying interest that emerged among new-home shoppers in the first quarter this year raised builders’ expectations but then failed to translate into actual sales.

The April decline “also is reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals”.

NAHB chairman Barry Rutenberg said that despite earlier home-shopper interest in new homes, “consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts”.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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