US builder confidence flat in Sept after four-month advance

17 September 2013 17:05  [Source: ICIS news]

WASHINGTON (ICIS)--Market confidence among US housing contractors held steady in September following four straight months of gains, a key survey said on Tuesday, indicating a pause in builder outlook as home prices and interest rates increase.

In its monthly survey of business prospects among its members, the National Association of Home Builders (NAHB) said that its housing market index (HMI) held steady at 58 last month, the same as the downwardly revised August reading of 58.

The August HMI had originally been estimated at 59.

NAHB chairman Rick Judson said that “while builder confidence is holding at the highest level in nearly eight years, many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates”.

Home mortgage interest rates currently are about 4.5% for a fixed-rate 30-year loan, a full percentage point higher than a year earlier.

NAHB chief economist David Crowe noted that builder confidence levels have seen solid gains over the last year, but “we are seeing a pause in the momentum as consumers wait to see where interest rates settle”.

Judson said that while current mortgage loan rates are still quite favourable, record lows of the past few years - dipping to 3.5% for a fixed-rate 30-year note - “are probably a thing of the past”.

Housing market watchers and others are awaiting word from the US Federal Reserve Board on Wednesday on whether the central bank is to begin easing back on its longstanding economic stimulus campaign.

Should the Fed announce measures to step down those liquidity stimulus measures, mortgage loan rates could be affected.

Crowe also cited continuing “headwinds of tight credit, shrinking supplies of lots for development and increasing labour costs” as contributing to the flat-line in builder confidence for last month.

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 index had held steady in the mid-60s and even topped 70 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 and through most of 2010 and 2011, the HMI measure of builder confidence began an apparent recovery in early 2012 but then seemed to peak at 47 in December-January, dipped to 41 in April this year and then turned up again in May.

The housing market is a key downstream consumer industry for a wide variety of chemicals, resins and derivative products involved in home construction and as components in equipment and furnishings that go into new homes.

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


By: Joe Kamalick
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