NAHB index drops to record low n July
* The group's overall index dropped to 16 in July from 18 in June. Economists were expecting no change. This is the lowest reading in the history of the index, which dates back to 1985.
* The sub-index measuring present home sales fell to 16 from 17. The sub-index measuring expectations about future sales dropped to 23 from 27. Meanwhile, the sub-index measuring prospective buyer traffic dropped to 12 from 16.
* Regionally, the index dropped in three out of four regions -- to 10 from 16 in the Midwest, to 20 from 21 in the South, and to 13 from 16 in the West. It rose to 14 from 12 in the Northeast.
It's tough to be confident about housing when the credit markets are imploding, gas is $4 a gallon, unemployment is climbing, and consumers are the gloomiest they've been about the future in several decades. So it's not surprising that the NAHB index set a fresh low this month. The question is, what happens next?
The government is taking extraordinary steps to backstop Fannie Mae and Freddie Mac. The FHA is ramping up originations to make up for the exit of private lenders (including the recently re-named IndyMac Bancorp, a $77 billion mortgage originator in its last full year of loan-making). And policymakers are putting on a full court press to restore confidence in the housing and financial markets.
It's an open question as to whether they succeed in the longer term. But no matter what, it's going to be a rocky road for home sales. Home sellers and home builders will be forced to adjust appropriately.