US homebuilder confidence dips in Oct for 2nd month in a row

16 October 2013 16:15  [Source: ICIS news]

WASHINGTON (ICIS)--A key housing sector survey on Wednesday indicated that US home builders are less confident about market prospects, with construction industry leaders blaming labour costs and uncertainty about federal fiscal policy.

In its monthly survey of housing contractors, the National Association of Home Builders (NAHB) said that market confidence among its members fell by two points in October from the downwardly revised September reading.

NAHB said that its housing market index (HMI) fell to 55 this month from the 57 level recorded for September.

The September HMI initially had been set at 58.

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.

With the October downturn in the HMI, the index has fallen for two consecutive months. The September decline had ended a four-month run of improving home builder confidence levels.

However, NAHB chairman Rick Judson noted that while contractors’ confidence has weakened in the last two months, “builder optimism remains above 50 and we are seeing signs of pent-up demand in many markets across the country”.

“This slight dip in builder sentiment is the result of continuing challenges in the marketplace with regard to the cost and availability of labour and lots and uncertainty in Washington,” Judson said.

NAHB chief economist David Crowe also blamed a recent spike in mortgage interest rates along with “paralysis in Washington that led to the government shutdown and uncertainty regarding the nation’s debt limit”.

Crowe said that the bump in interest rates and fiscal chaos in Washington “have caused both builders and consumers to take pause”.

But, Crowe added, interest rates are still near historic lows, and “once this government impasses is resolved, we expect builder and consumer optimism will bounce back”.

During the US housing boom years of 2002-2005, the HMI 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 a recovery in early 2012 but then seemed to peak at 47 in December-January. The index dipped to 41 in April this year and then turned up again in May, making modest but steady monthly gains until the September downturn.

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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