Home builder confidence drops amid poor weather, glut of foreclosures

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Home builders are feeling less upbeat amid growing fears of another dip in the housing market, according to a closely watched index of builder confidence released Monday.

Poor weather and competition from sales of discounted distressed properties added to builders’ anxieties in March, the National Assn. of Home Builders said. Its index of builder confidence fell back two points to 15 in March. The index, which was at 39 early in 2007, hit a record low of 8 in January 2009.

“Home buying activity remains muted, especially on the new housing side of the ledger. Builders of new homes are simply having a very difficult time competing against ‘nearly new’ homes being dumped on the market by burned speculators and banks,” Michael D. Larson, a housing and interest rate analyst with Weiss Research, wrote in a note to clients Monday. “That dynamic will persist for some time because foreclosed homes will continue to be parceled out into the market over the next couple of years.”

In a statement, NAHB Chief Economist David Crowe said the poor economy and tight credit were also hampering builders’ efforts but that 2010 would be a year of recovery.

“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,” Crowe said. “That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25% improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand.”

-- Alejandro Lazo