NAHB index falls in October

The latest National Association of Home Builders index was just released. The index fell to 18 in October from 19 in September. The subindex tracking present sales fell to 17 from 18, the subindex tracking expectations about future sales dropped to 27 from 29, and the subindex measuring prospective buyer traffic slumped to 14 from 17.

Regionally speaking, we saw weakness in three out of four parts of the country. The index that tracks activity in the West fell the most -- to 14 from 18 -- while the index that tracks activity in the Northeast was the lone bright spot, rising to 25 from 24. Both the Midwest and South indices dipped to 18 from 19.

We saw auto sales slump after the "Cash for Clunkers" program expired. Now we're seeing a similar hangover in housing thanks to the looming expiration of the "Cash for Cottages" tax credit. Specifically, all three subindices in the NAHB report declined, as did three out of four regional indices.

The overall housing recovery remains on track, with new home inventories falling substantially and low home prices helping to bring some buyers off the sidelines. But these latest figures underscore my belief the recovery will be a drawn out, gradual affair as opposed to a vigorous "V-shaped" rebound.