Realty Check

Home Builder Sentiment Down: And They’re Mad At Me??


If you happened to read my blog last week, you’ll remember what a warm reception I got from the CEOs of the major public home builders at the JP Morgan Basics and Industrials conference. As they summarily rejected my polite requests for interviews at our live camera, they also made it abundantly clear that it was media hype fueling the negative sentiment among healthy home buyers across the nation.

Yes, were it not for lil ol’ me spouting all these nasty numbers, Jane and John Doe would be plopping down that hefty down payment on their brand spanking new home in that brand spanking new development with all those brand spanking new chain-store strip malls just a stone’s throw away. Forget rising interest rates, tightening credit, plummeting affordability and severe overbuilding driven by speculators who never intended to set foot in any of the structures they purchased, it’s all me.

And then again today I had the joy of reporting yet another negative number for the housing sector. This is a fave of mine, because it’s not about the buyers and the government stats, or the real estate agents and their sales figures--it’s about the builders and their feelings, nothing more than feelings (sorry).The HMI, Housing Market Index, from the National Association of Home Builders and Wells Fargo, rates home builder sentiment on a scale where anything over 50 is considered positive and under considered negative.

“Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate traffic of prospective buyers.”

And the number is down again--down to 28, a low not seen since February of 1991. The index was lower in January of ’01, at 20, but you might remember Gulf War I that Mr. Bush Sr. kicked off, and, well, that had everyone far more worried than the recession going on within the nation’s borders. Anyway, it bounced back to 28 when the war quickly proved to be, well, effective, just one month later and then of course rose to close to 80 by the end of the decade.

So despite the fact that all these CEOs were telling me that I’m the only one shouting from the rooftops that the housing market is in trouble, they were busy quietly telling the bean counters at NAHB, that they really kinda felt the same way.

Dave Seiders, the Chief Economist for the NAHB tells me he feels my pain. I was regaling him today about how the CEOs were so enamored with me--NOT--and he said that I was one up on him. They positively can’t stand how outspoken he is about the trouble in home building, about how the builders overbuilt and misjudged the market, and how he’s continually pushing back his forecast date for a housing recovery. And he’s one of them!

Yes, I know, the CEOs need to pump the stocks and pump up the stockholders’ enthusiasm, but come on. Anyone smart enough to navigate E*Trade can also figure out how to run a 6 month stock chart on And if they run a few, they’ll get the picture that the home builder stocks have fallen about 40% from their latest peak in early February, while the rest of the market was running like the wind.

So I’d just like to throw out a big ol’ thank you to all those home builders out there who told their industry representatives that they think there might be some problems still to work out in housing. Forgive me for reporting your number. Didn’t mean to seem too bearish. And do let me know if there’s anything I can do to help.

Questions?  Comments?