Homebuilder Confidence Drops to 16-Year Lows

Homebuilder confidence dropped two points in June, dropping the Wells Fargo Housing Market Index [HMI] to 28 -- its lowest point in 16 years, according to National Association of Home Builders [NAHB] data released Monday (see MarketWatch graph). An index rating of 50 means positive and negative builder confidence were equal. The decline was in line with economist expectations. The index bounced in early 2007 on unseasonably warm weather, but builders have renewed their pessimistic outlook with new vigor as delinquencies and foreclosures are forcing lenders to send potential home buyers away. The index is down 11 points from February's 39. It peaked at 72 in 2005, and was 42 last year at this time. NAHB chief economist David Seiders: "Home sales most likely will erode somewhat further in the months ahead and improvements in housing starts probably will not be recorded until early next year. As a result, we expect housing to exert a drag on economic growth during the balance of 2007." On June 6, the National Association of Realtors lowered its forecasts for homebuilding and sales again. It said a tightening of lending standards are making homes less affordable and buyers less plentiful.

Sources: Press release, Index data, Bloomberg, MarketWatch
Commentary: Housing Market Index Plumbs New Lows • S&P 500 Performance and the NAHB Home Builder Index: How Correlated? • Housing Bubble and Real Estate Market Tracker
Stocks/ETFs to watch: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB)

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