US Homebuilders' Confidence Keeps Declining

Home Construction
Home Construction

Hope for a modest recovery in the housing sector spurred by a recent decline in mortgage rates, seems to be a far fetched pipe dream. The latest reading of the housing market index, a metric of present sales of new homes, expected sales in the next six months, and traffic of prospective buyers, fell 1 point in January to a record low of 8. A year ago, the index was at what was considered a "low" reading of 19. The sharpest contraction in the index was derived from single-family homes, with a reading of 6.

The housing market index, compiled by the National Association of Home Builders along with Wells Fargo, is not only indicative of demand for new housing, but also consumer financial confidence. The current housing market condition, which indicates a build up of housing inventory, has been brought in part by the lack of lending. As a repercussion, there has been a negative impact on the supply chain such as appliances, new furniture, lumber, and hardware.

The latest government data for housing starts in December 2008, released this morning, showed a steep decline of 15.5 percent, to a seasonally adjusted rate of 550,000 units; the lowest level since the Commerce Department started compiling data in 1959. As the pain in the housing industry continues, the bottom hunters will have to brace for another month of negative data.

The following table depicts the performance of some publicly held homebuilding companies: