US home builders lose confidence in March for second month

18 March 2013 16:57  [Source: ICIS news]

WASHINGTON (ICIS)--Market confidence among US home builders fell slightly in March for the second straight month, a key survey said on Monday, as contractors blamed increasing materials and labour costs and continuing tight credit.

In its monthly survey of residential construction contractors, the National Association of Home Builders (NAHB) said that its housing market index (HMI) fell two points in March from February to a reading of 44.

The index reached a recent peak of 47 in December last year, reflecting a definite if modest upturn in the crucial US housing industry in the second half of 2012.

But the index stalled at that 47 level in January, then slipped to 46 in February before edging down a further two points 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.

After bouncing around in the middle teens for the rest of 2009 through most of 2011, the HMI measure of builder confidence began an apparent recovery in early 2012.  The index rose into the upper-20s by midyear and then to the mid-40s by year end.

Now the two-month downturn in the index suggests some difficulties ahead for the long-sought housing recovery.

NAHB chairman Rick Johnson said that while many builders are seeing increased demand for new, single-family homes in their markets, that demand does not necessarily translate into more sales.

Johnson said NAHB-member firms report that “their enthusiasm is being tempered by frustrating bottlenecks in the supply chain of developed lots for sale along with rising costs for building materials and labour”.

In addition, he said, longstanding tight lending terms continue to make it difficult for builders to get development funding and for would-be buyers to qualify for mortgage loans.

NAHB chief economist David Crowe said the industry is still hampered by effects of the 2008-2009 recession and the slow national recovery since then.

“During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots,” he said.

He said that while US home builders certainly are more confident now than a year ago – when the HMI was at 28 – it is clear that “the road to a housing recovery will be a bumpy one until these issues are addressed”.

The home building sector, especially construction of new single-family homes, is a key downstream consuming industry for a broad range of chemicals, resins and derivative products.

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

By: Joe Kamalick
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