Builder Confidence Hits New Low; NAHB Urges Buyer Stimulus : HousingWire
by Tom on January 21, 2009
in Market Musings, house prices
Home builder confidence across the U.S. slumped to a new record low of 8, according to a monthly survey released Wednesday by the National Association of Home Builders. The housing market index, measuring builder perceptions of current single-family home sales and sales expectations for the next six months, is based on a scale of 100 where any number over 50 indicates more home builders perceive sales conditions as good than poor. An all-time low of 8 — a downward slip of a single point from December’s survey — indicates sales conditions are worse than they have been in more than 20 years, since the NAHB began the survey.
Tom here…..
A couple of questions for you:
1. If we have too many houses, should we be subsidizing the builders who want to build more?
2. If we start doing “stimulus” for everyone, how do we draw the line? How do we afford to buy everyone a “free ride?”
3. But doesn’t housing have so many ripple effects in the market and the economy?
So, what do we do?
Tom,
I don’t completely buy your thesis. Are there areas where we have more houses than buyers, yes, but that doesn’t necessarily indicate too many houses. Now in my area of Florida I would argue there are too many houses. Builders overbuilt for about 5 years 2002-07, because of the easy credit and everyone thinking they were a real estate investor. But, since we are still a net importer of population, time will overcome the oversupply. However, in many markets this over building didn’t happen. What did happen was easy credit brought more people into home ownership and scarcity drove pricing up.
Now the pendulum has gone back the other way and tight credit is keeping folks from entering the market and also keeping the normal churn from occuring. Add in fear of falling values and you have the current home building nightmare. For now, new home building has basically come to a halt. That is good as it will allow for the oversupply to be dealt with.
No amount of stimulus will change those facts. But by encouraging the credit markets to find a reasonable middle ground, and by lowering interest rates we might start to see the normal churning (moving up or down in size and neighborhood) start again. And we might start to see first time home owners be able to get into a home. This will be the start of the process again that will END up with new home builders building homes.