Economic Outlook

WASHINGTON, April 15 - Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI held at 20, up marginally from the record low of 18 set in December of 2007 (the series began in January of 1985).

“With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year,” said Sandy Dunn, NAHB president and a home builder from Point Pleasant, W.Va.  “At this point, all eyes are on Congress and its efforts to craft meaningful legislation to help support the housing market and stabilize our nation’s economy before it heads deeper into recession.”

“While builders continue to report improvements in traffic through their model homes compared with late last year, this activity has not translated to actual sales. That’s where Congress can make a big difference,” noted NAHB Chief Economist David Seiders. “Measures that stimulate consumer confidence in the housing market, push the fence-sitters into the ring and put a floor under house prices can successfully halt the drag that housing is exerting on the national economy, and help stabilize financial markets at the same time. But such measures need to be implemented as soon as possible in order to limit the severity of the economic recession that now is underway.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

The HMI’s component index gauging current sales conditions declined two points to 18 in April, its lowest level since November of last year. The component gauging traffic of prospective buyers held even at 19 for a third consecutive month, up from a low of 13 last December. The component gauging sales expectations for the next six months rose four points to 30, although this measure was down substantially from a year earlier.

Regionally, HMI results were mixed this month, with a one-point gain to 22 registered in the Northeast, a one-point decline to 15 registered in the Midwest, a two-point decline to 24 posted for the South and a two-point gain to 17 posted for the West.

WASHINGTON, April 15 - The deepening slump in the nation’s housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders (NAHB).

“The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers,” said NAHB’s David Seiders. “It’s now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario.”

To guard against a longer and deeper downturn, Seiders said that Congress should take immediate steps to stimulate the economy through actions specifically targeted at improving the ailing housing market — such as a temporary home buyer tax credit, modernization of the Federal Housing Administration and oversight reform for the housing-related government sponsored enterprises.

“Stopping the downward trend in housing prices is key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that,” he noted.

Given the ongoing erosion in housing finance markets and buyer demand, Seiders has adjusted NAHB’s official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30 percent. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27 percent decline for 2008.

“This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009,” Seiders said.

“Stimulus bills recently passed in the Senate and the House Ways and Means Committee are welcome steps in the right direction. This is one instance where prompt and appropriate efforts by the nation’s lawmakers could make a significant difference in limiting the depth and duration of the economic downturn.”