Thursday, August 17, 2006


NAHB/Wells Fargo Home Builders Index

This past Tuesday the NAHB/Wells Fargo Home Builders Index was released and it wasn't pretty.

The confidence of U.S. home builders collapsed in August, falling to the lowest level since February 1991, the National Association of Home Builders said Tuesday. The NAHB/Wells Fargo housing market index dropped by seven points to 32 in August, indicating that most builders think the housing market is poor. A year ago, the index was at 67. A reading of 50 would indicate builder sentiment was balanced between good and poor. The index peaked at 72 in June 2005 and has fallen in the 12 months since then. It's the fastest decline in the 21-year history of the index, which has had a fairly good record of predicting the number of new homes started. Builders in all four regions of the country are pessimistic about the market. [Emphasis added.]

Let's break this down.

-Lowest level of confidence in 15 years.

-Majority of builders pessimistic.

-Quickest decline in confidence in 21 years.

-Index has a good track record of predicting new home construction.

Let me add that according to the service that I use to track economic numbers that the index was expected to be 39, not 32, so it came in worse than the economists expected.

Yesterday, new housing starts for July came in slightly worse than expected; down 2.5% vs. expectations of down 2,.0% - 2.2%.


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