December’s Record Shows Low Homebuilders’ Confidence

After several months of low record in homebuilders’ confidence, this month is no different. Things get worse and this threatens the housing market for this is a sign that housing recession will continue into a fourth year.

According to the National Association of Homebuilders/Well Fargo, builder confidence index is at 9 this month. Since this reading is below 50, it means respondents see the current condition as poor.

Why? This is because of the continuous flooding of foreclosures in the market, bringing down home prices, resulting to shrinking builders’ profits. Prospective home buyers are denied by lenders who resist government efforts to release credit.

It has been forecasted that builder confidence is to rise at 10 this month, while usual projections ranged from 7 to 13. This confidence survey gets builders’ on current sales (good, fair, or poor), and lets them gauge the prospective buyers’ traffic, as well as their outlook for the next six months.

Speaking of low builder confidence, here are the details:

  • single-family home sales – dropped to 8 from 9 last month
  • buyer traffic – still the same at 7
  • sales expectations – dropped to 16 from 18 last month

Area-wise, confidence has dropped the greatest in the South, from 12 to 10, while next is in the Midwest, which has dropped one notch to 6. Northeast has remained at 11, while West’s has risen to 7 from 6.

Borrowing costs drops as Federal Reserve has promised to buy the debts to Fannie Mae and Freddie Mac. In fact, Mortgage Bank Association has reported that the average rate on a 30-year fixed-rate loan has dropped to lowest.
Home building permits also fall. According to the Commerce Department, homebuilders have started work on homes in November at a low annual rate of 736,000. With all of these, housing is expected to keep falling in 2009.

To save the housing economy, foreclosures has to be stopped to bring back competitive home prices as well as prospective buyers, bringing to life homebuilders’ confidence.

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