Interest Rate Roundup

Monday, June 18, 2007

NAHB index falls ... again

I know I sound like a broken record sometimes, but I just have to say it again: There is NO evidence the housing market has bottomed. If anything, the latest numbers show that it's getting worse. Just look at the National Association of Home Builders' index figures for June:

* The overall index dropped to 28 from 30 in May. That was worse than the 30 reading forecast by economists ... down sharply from 42 a year ago ... a fresh cycle low ... and the worst reading since February 1991.

* All three components of the index fell. The index measuring current single-family home sales dropped to 29 from 31 ... the index measuring future single-family home sales dropped to 39 from 41 ... and the index measuring prospective buyers traffic slipped to 21 from 22.

* Regionally, buyer traffic was up in the Northeast, but down everywhere else (Midwest, South, West)

The housing industry faces multiple problems -- Tighter mortgage lending standards, excess for-sale inventories, the absence of speculative buyers, and relatively weak sales from "core" customers. To top it all off, mortgage rates are climbing again. Thirty-year fixed mortgages are going for 6.61% now, according to the latest data from the Mortgage Bankers Association. That's the highest since last July.

These latest numbers confirm that all the talk of a housing market bottom is just that -- talk. My view remains the same: A longer-lasting rebound won't come until at least 2008, likely in the back half of the year, because supply and demand are way out of balance. Finding equilibrium will take time.


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