The June NAHB/Wells Fargo Housing Market Index fell 3 points to a nine month low of 13. The index had been at 16 for six of the last seven months. The component with the largest influence this month was builders’ expectation for the next six months, which fell four points to 15 and tied the all time record low in March 2009.
Builders are faced with price pressures on the supply and demand ends. Consumers are looking for unrealistic deals because of the low prices they see in the foreclosure and distressed sale markets. But, builders are experiencing higher material prices because of the embedded energy costs in materials such as roofing shingles and vinyl siding as well as increases in basic commodities such as copper. The results are reluctant consumers who want to buy at prices driven down by foreclosed homes and builders who are paying more for their inputs.
The soft spot in the overall economy has affected consumers’ willingness to buy something as major as a home so traffic is also down. Credit continues to be a problem for both consumers and builders, which puts a further dampening on those home buyers that see the advantage in current low interest rates and low house prices but cannot qualify for a mortgage.
The one glimmer of hope is a recent NAHB poll on public attitudes toward home ownership. The poll shows overwhelming support for home ownership across all types of demographics, political leanings, regions of the country and whether they have a mortgage or not. Likely voters are also in strong support for the current tax provisions that assist home buyers.