Interest Rate Roundup

Tuesday, June 15, 2010

NAHB index tanks in June

The National Association of Home Builders reported its latest figures on home builder optimism -- and they were plum ugly. The headline index tanked to 17 in June from 22 in May. That was far worse than the 21 reading that economists were looking for.

All three sub-indices fell: The index tracking present sales dropped to 17 from 23 ... the index tracking expectations about future sales fell to 23 from 27 ... and the index tracking prospective buyer traffic slumped to 14 from 16. Regionally speaking, the gentlest declines were in the Midwest (down to 14 from 17) and the South (to 19 from 22). The West index dropped to 15 from 19 while the Northeast index was nearly cut in half, falling to 18 from 35.

The latest housing market figures remind me of what happens when an athlete stops taking steroids. Those tackling and batting records pass into the history books -- and all you're left with is a washed up guy whose best days are behind him. In the case of housing, the home buyer tax credit clearly juiced sales through the spring. But the drugs have now been taken away, and we're seeing sales slump as a result. In fact, we haven't seen a monthly decline this severe since November 2008 -- in the depths of the credit crisis and recession.

Housing remains very affordable, thanks to the double-barreled benefit of cheap financing and cheap pricing. But we're lacking a catalyst for a robust recovery, especially when you consider the lackluster state of the U.S. labor market. So don't look for the housing or construction industries to hit the ball out of the park any time soon.


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