NAHB Builder Confidence Drops To June 2009 Levels, Winter Snowfall Blamed As Usual

And so the snow scapegoating continues, now in the NAHB/Wells Fargo Builder Confidence index, which blamed the February confidence decline on "unusually poor weather conditions" i.e., snow in the middle of winter. The index, which came out at 15, was a drop from 17 in February, and is now back to June 2009 levels. More ominously the spread between hope and reality, or the 1-family Sale Present Time component and the Next 6 Months components, dropped to 9, matching the tightest level over the past year, even as the Prospective Buyer Traffic component dropped from 12 to 10, or the lowest reading since March of 2009. Do we really need any more confirmation that even with all the governmental stimulus bells and whistles, housing has relapsed into the second leg of the depression.

Full text from the NAHB press release:

Builder confidence in the market for newly built, single-family homes fell back two points to 15 in March as poor weather conditions and distressed property sales posed increasing challenges to both builders and buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"Unusually poor weather conditions certainly had a negative effect on builders' business in February," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "At the same time, the continual flow of distressed properties priced below the cost of production is having an adverse effect on new-home appraisals and also making it tough for builders' customers to sell their existing homes."

"The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time," said NAHB Chief Economist David Crowe. "That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index 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 "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 conditions as good than poor.In declining two points to 15 this March, the HMI returned to where it was in January 2010, losing the ground it had gained in the intervening month. Each of the HMI's component indexes fell in March; the component gauging current sales conditions declined two points to 15, while the component gauging sales expectations in the next six months declined three points to 24 and the component gauging traffic of prospective buyers declined two points to 10.

Regionally, the HMI results were mixed in March. While the Northeast posted a five-point gain to 23 and the West posted a one-point gain to 15, the Midwest HMI slid three points to 10 and the South HMI edged down one point to 18.
 

Analyst says the housing market will double dip

Meredith Whitney, CEO of Meredith Whitney Advisory Group, says mortgage backed securities are in for a correction and “the housing market surely will double dip.” Whitney said the government initiated measures to support the housing market have been “murky” and the likely wave of foreclosures will force the housing market further down. When the Federal Reserve stops buying mortgage securities, the prices of mortgage securities will be under pressure. “The Fed has been supporting the housing market, a third of the Fed's balance sheet is tied to mortgages. If the Fed pulls back, that's a really big deal... because there's no substitute buyer." Whitney said the lending model is “structurally broken,” and given that the securitization market has dried up and the prices of mortgages for consumers have not risen to compensate banks for that loss of revenue, banks have not been enthusiastic about lending for the last couple of years. Under the current circumstances, th e Federal Reserve can't make banks start lending again. "Normal will not be what it has been over the last 20 years and there's disappointment baked into that."

Housing starts fall 5.9% in February

The Commerce Department said housing starts declined 5.9% to an annual rate of 575,000 in February; analysts had expected to see steeper drop in housing starts in February. Single-family houses, which account for 75% of the industry, dropped 0.6% to a 499,000 rate. The housing sector was hit by snowfall in February. The data “definitely reflects the severe weather effect,” said Ellen Zentner, senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi. Building permits, a sign of future construction, dropped 1.6% to a 612,000 annual pace. The inventory of total houses under construction fell to 492,000 in February, the department said. Rising foreclosures are adding to the housing inventory and discouraging new housing starts. Analysts are not very optimistic about the near-term. “There are still a lot of headwinds for builders,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, a forecasting firm. “There’s enormous competition from distressed homes t hat’s weighing on demand for new housing. It’s going to be a very, very grudging recovery.”

Builder confidence continues to remain low

The National Association of Home Builders (NAHB) said its National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which measures builder confidence in sale of houses, dropped 2 points to a reading of 15 in March from 17 in February. NAHB Chief Economist David Crowe said: “The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time.” An index reading of below 50 indicates negative sentiment about the market; the last time the index was over 50 was in April 2006. The HMI for March was based on a survey of home builders, who answered questions about the current and near-term sales prospects. The index for expected sales over the next six months declined 3 points to 24, denoting builders’ negative outlook for the near-term. “This is a clear negative for the struggling housing mark et,” said Jennifer Lee, senior economist at BMO Capital. “The sector, which had stabilized up until recently, has entered another rough patch of turbulence.” Crowe said the “inventory of new homes on the market is at an extremely low level” and expects a “25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand.”

Credit card delinquencies hold steady at major lenders

Data released by major lenders suggests that credit card delinquencies are holding steady in the first quarter of this year. At 4 of the 5 major lenders, delinquency rates slipped or held steady in February while Citigroup saw a rise in delinquency. At Bank of America, the largest U.S. bank, delinquency rate dropped for a third straight month, to 7.23% in February from 7.35% in January. Capital One, the third largest issuer, said accounts at least 30 days delinquent—an indicator of future loan losses—declined to 5.51% in February from 5.80% in January. At American Express, the delinquency rate remained unchanged from the prior month at 3.6%. Citigroup, said both charge-offs and delinquencies rose in February, with delinquencies rising to 5.94% from 5.75% in January. Is the worst over for consumers in the U.S.? "Clearly the delinquency trends are improving, and they have been for the last couple months. The question is, particularly in February, how much of it is a seasona l benefit," said Michael Taiano, analyst at Sandler O'Neill. Taiano said consumers tend to use funds from tax refunds and year-end bonuses to pay off credit card debts during this time of the year and "it's hard to tease out now much of an impact that is." Taiano added that "most of the companies have already suggested that losses probably have peaked, whether it was in the fourth quarter or the early part of the first quarter.”

Moody’s warns of “abrupt rating consequences”

In its quarterly report on sovereign debt, Moody’s, a credit rating agency, has expressed concern about the impact of rising government debt on sovereign ratings. While stating that there is "no imminent rating pressure" on the triple-A rated government securities, Moody’s said the margin for error on government debt has substantially diminished. If stimulus measures are not withdrawn in a timely manner, the interest rates could rise "with more abrupt rating consequences a possibility." Exports cannot be seen as an alternative to domestic demand for improving the health of the economy. "Demand from the emerging world undoubtedly provides some support, but cannot on its own compensate for weak domestic demand," Moody's said. Governments which do not wish to see their debt downgraded will have to cut back on spending and make harsh decisions. Pierre Cailleteau, managing director at Moody’s, wrote in the report that "preserving debt affordability ... will invariably requir e fiscal adjustments of a magnitude that, in some cases, will test social cohesion." The report notes that U.S. debt service costs could rise from around 7% in 2009 to 11% in 2013 under Moody's baseline scenario. U.S. debt service costs are higher in 2013 under the Moody's assumptions than in any of the other major triple-A-rated governments -- the United Kingdom, Germany, France and Spain.

HOME

www.mauirealestatebuyer.com