Home builder confidence fell for the first time in three months in June as the impact of the home buyer tax credit waned.
The National Association of Home Builders’ housing market index — a monthly gauge of builder sentiment — dropped to 17 this month from 22 in May, the group announced yesterday. Index readings under 50 indicate that more builders view conditions unfavorably.
The tax credit, which expired in April, provided home buyers with tax breaks worth as much as $8,000. Buyers with signed contracts have until the end of this month to complete their purchases.
NAHB chairman Bob Jones said the tax credit did its job by stoking spring sales.
“We expected a temporary pullback in the builders’ outlook after the credit expired,” he said. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels.”
The decline also was more precipitous than economists anticipated. The median estimate in a Thomson Reuters’ poll of economists taken before the release called for the home-builder confidence headline index to edge down to 21.
All three component indexes also fell in June. The current single-family home sales index slumped to 17 from 22, and the sales expectations index for the next six months dropped to 23 from 27. The traffic of prospective buyers index slid to 14 from 16.
NAHB chief economist David Crowe said home builders remain cautious, despite the improving economy, rising employment, low mortgage rates and stabilizing home-value — all factors that support increased sales.
“Several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties,” Crowe said.
