Interest Rate Roundup

Monday, July 19, 2010

NAHB index slumps again in July, hits 15-month low

The National Association of Home Builders just released its latest read on the housing market. The group's housing market index slumped to 14 in July from 16 in June. That's the lowest reading since April 2009 and worse than the average economist forecast of 16.

The subindex measuring present sales dropped to 15 from 17, while the subindex tracking expectations about future sales dipped to 21 from 22. The subindex measuring prospective buyer traffic fell to 10 from 13.

Regionally, it was a mixed bag. The Northeast index jumped to 23 from 16 and the Midwest index ticked up to 15 from 14. But the South index slumped to 14 from 19 while the West index collapsed to 9 from 14.

Houses are cheap. Mortgage rates are extremely low. Yet home shoppers are MIA. That's what the latest NAHB figures are telling us. Builders surveyed by the trade group were generally gloomy about current and future sales, and they aren't seeing much traffic through their developments.

My take? The expiration of the tax credit is clearly hurting the industry. But the deterioration in the broader economy and the dismal labor market are much more powerful -- and negative -- forces. With growth slumping again, and unemployment hovering near the double digits, we simply don't have the necessary ingredients for a sustainable recovery in housing. So we're not getting one.


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