Confidence among US homebuilders continued to spiral downwards in July as the sputtering housing market dented demand for construction.
The National Association of Home Builders said on Monday that its index of builder sentiment had slipped from 16 to 14 in July. That represents its lowest reading since April 2009 and was worse than economists had forecast.
“Builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets,” said Bob Jones, NAHB chairman.
July was the second month running that homebuilder sentiment declined, with spirits slumping in the aftermath of the first-time homebuyer tax credit, which expired at the end of April.
The NAHB contends that builders are being hampered by competition from foreclosed homes selling at bargain prices, as well as from tight credit. It expects, however, that low mortgage rates and cheap construction costs will help lure buyers later this year.
Last week, Standard & Poor’s, the credit rating agency, cut its rating on KB Home, one of the biggest US builders. It said that weak orders would weigh upon sales at the company, making profits unlikely next year.
Meanwhile, Toll Brothers, the US luxury homebuilder, has begun to diversify its business and said on Monday that it was forming Gibraltar Capital, which will focus on acquiring distressed real estate portfolios and helping banks and other developers with “ the workout of troubled real estate”.
“We believe there are many potential investments arising from the distress in the real estate industry,” said Douglas Yearley, Toll Brothers’ chief executive.
Economists at Capital Economics noted the impact of the tax credit on new home sales, pointing out last week that sales had jumped by 29 per cent in the two months prior to April, but had plunged by a third to a record low in May.
“The expiry of the government’s homebuyer tax credit at the end of April has triggered a double-dip in activity,” said Paul Dales at Capital Economics. “The clear incentive for buyers to bring forward their house purchase to take advantage of the tax credit meant that activity was always going to fall sharply once the credit expired.”
However, the NAHB said optimism about the housing market’s fate in the next six months had improved, although conditions were tepid and prospective buyer traffic was bleak.
Regionally, builders in the midwest, south and west all struggled. The north-east was a bright note in July, with builder confidence climbing by seven points.
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