Builder confidence slips further

By Staff -- Home Textiles Today, 7/19/2006 1:36:00 PM

The Housing Market Index (HMI), compiled by Wells Fargo Bank and the National Association of Home Builders, tracks current sales of single-family homes, expectations for the next six months, and traffic from prospective buyers. All three index components fell in July, and hardest hit was the six-month outlook, which fell five points to 36. Current sales fell four points to 43, and traffic was off by two points, to a level of 27.

Home builders in the West, the most optimistic during the past several months, recorded the biggest decline in confidence with a nine-point drop to a level of 51. A five-point decline, to 36, was recorded in the Northeast, and builders in the Midwest posted a four-point drop, to 21.

The one region that gained, the South, picked up two points to a level of 50, but even this is down considerably from a cyclical high of 77 in June of last year.

David Seiders, chief economist of the builders trade group, pointed to a looming concern: “The potential for more monetary tightening by the Federal Reserve, that could drive interest rates, and thereby homeownership costs, even higher.” Ironically, he noted, inflation-fighting moves at the Fed have helped firm up the rental market, driving rents higher -- a key component of the core inflation rate the Fed is trying to contain.