Here’s Why Home Builder Confidence Remained Low in September

According to the National Association of Home Builders, builder confidence in the market for newly built, single-family homes — the National Association of Home Builders/Wells Fargo Housing Market Index — was virtually unchanged in September, falling a single point from August to 14. The index has remained between 13 and 16 for six consecutive months.

“Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit,” said Bob Nielsen, NAHB chairman and a home builder from Reno, Nevada.

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Each of the HMI’s three component indexes declined in September. The component gauging current sales conditions slipped one point to 14, while the components gauging sales expectations in the next six months and traffic of prospective buyers each declined two points, to 17 and 11, respectively.

The regional HMI results were mostly down in September, with the Midwest posting the only gain, climbing one point to 11. Meanwhile, the Northeast and South each posted two-point declines to 15 and the West posted a three-point decline to 12.