Builder Confidence Unchanged Before Tax Credit Extension

You may not know it, but the National Association of Home Builders has been conducing a survey for almost 20 years that gauges builders perceptions of what is going on in the industry. The survey is known as the Housing Market Index (HMI) and the categories include builder confidence in three areas: the newly built, single-family home market, builder’s current sales expectations and builder’s sales expectations for the next 6 months. Scores are used to calculate an index with anything scoring over 50 meaning that there are more builders with a good view than a poor view.

It’s not surprising that the results in November showed that builder confidence in the market for newly built, single-family homes remained the same as it did in October with a score of 17. The score for traffic of prospective buyers stayed the same as well at 13, and sales expectations for the next 6 months bumped up 2 points to 28. One section of the HMI highlighted that many respondents showed they were losing sales due to low appraisal values which can be tied to foreclosed and distressed properties.

These scores seem low, but the good news is that most of those who participated in the survey responded before the home buyer tax credit was extended. With this decision still up in the air, many home builders did not know if this valuable homebuyer incentive would still be available. According to a report, many home builders and buyers were in” something of a holding pattern” as they waited to see whether or not the incentive was extended. NAHB Chairman, Joe Robson said “Now that Congress has done its job by both extending the tax credit into next year and expanding eligibility for it among potential buyers, we are very hopeful that this will have the intended stimulative effect on sales activity going forward.”

© 2009 Atlanta Real Estate Forum All Rights Reserved