U.S. Homebuilder Confidence Rose in February From Record Low
Confidence among U.S. homebuilders barely climbed in February from a record low, signaling the housing slump continues.
The National Association of Home Builders/Wells Fargo index of builder confidence increased to 9, higher than forecast, from 8 in January, the Washington-based group said today. A reading below 50 means most respondents view conditions as poor.
Record foreclosures are swelling the glut of properties on the market, forcing down home values and undermining builders’ efforts to revive demand and lighten inventory by cutting prices. After signing the stimulus plan into law, President Barack Obama tomorrow will announce extraordinary measures designed to stem repossessions and the drop in values.
“Home builders are especially concerned about the continually rising number of foreclosures and short sales, which are flooding the market with excess inventory,” David Crowe, the group’s chief economist, said in a statement.
The index was forecast to hold at 8 this month, according to the median of 44 projections in a Bloomberg News survey. Estimates ranged from 7 to 9.
The gauge was first published in January 1985 and averaged 16 last year.
The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. The survey also asks participants to gauge the outlook for the next six months.
Dim Outlook
The index of sales expectations for six months from now fell to 15 this month, a record low, from 17 in January. The gauge of current single-family home sales rose to 7 from 6 and the measure of buyer traffic increased to 11 from 8.
“People are looking for deals out there because they feel it is a buyer’s market,” Leif Thomsen, chief executive officer of Mortgage Master, a Walpole, Massachusetts-based lender, said in an interview. “The activity has gotten a lot better. It hasn’t necessarily materialized into sales yet 30 day payday loans.”
Confidence increased in three of four regions in February, led by a gain in the Midwest. Sentiment declined in the Northeast.
Obama’s housing recovery plan will accelerate loan modifications for distressed homeowners and will reform the bankruptcy system for foreclosures, Housing Secretary Shaun Donovan said Feb. 13. Obama has pledged to commit $50 billion to $100 billion to housing relief from the $700 billion Troubled Asset Relief Program enacted last year.
Foreclosures
Foreclosure filings in the U.S. rose 81 percent last year to 2.3 million, the highest on record, according to RealtyTrac Inc.
While a foreclosure-driven decline in prices has helped boost sales of existing homes, it is depressing new-home purchases as builders can’t compete. New-home sales last month dropped to a record-low 331,000 annual pace, according to figures from the Commerce Department.
It would take a record 12.9 months to whittle down the number of new houses on the market at the current sales pace. That is more than twice the five-to-six months of supply the National Association of Realtors has said is consistent with a stable market. It also suggests that builders will continue to hold back on production in coming months.
The Commerce Department is scheduled to release its report on January housing starts tomorrow. Economists surveyed by Bloomberg News project it fell to a record-low 530,000 annual rate.
Toll Brothers Inc., the largest U.S. luxury homebuilder, last week said first-quarter revenue plunged 51 percent.
“The past five months have been among the most difficult in U.S. economic history,” Chief Executive Officer Robert Toll said on a Feb. 11 conference call. Buyers are worried they may lose their jobs and won’t be able to sell their existing homes, he said.