The recovery is taking longer than anticipated in many sectors. This is especially true for builders. According to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released earlier this week, builder confidence was unchanged in May. It has been at this level for six of the last seven months.
Regionally, only the West saw an increase in builder confidence. It was up two points on the HMI scale to 16. Scores are compiled from builder perspectives on homes sales and sales expectations, with numbers over 50 considered a middle ground between good and bad.
The Northeast and South both posted slight declines in confidence, down five points in the Northeast and one point in the South. The Midwest was unchanged from the month of April.
"Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "In addition, many builders in this month's survey cited high gas prices as a further contributor to consumer anxiety and reluctance to go forward with a home purchase."
Partially to blame for slowed sales, and thus lowered builder confidence, is the access to credit. According to NAHB Chief Economist David Crowe, "Asked to identify reasons that potential customers are holding back at this time, 90 percent of builders surveyed said clients are concerned about being able to sell their existing home at a favorable price, while 73 percent said consumers think it will be difficult for them to get financing. Clearly, access to credit for both builders and buyers remains a considerable obstacle to the revival of the new-homes market."
The Commerce Department reports that new construction housing starts stumbled in April, down 10.6 percent. This large jump was related to declines seen in multi-family housing, an often "volatile" market according to CNN Money.
Building permits were also down. These issues are why Washington is anxious to find ways to stimulate borrowing as well as increase jobs. Job growth has been shown to be tied to the housing market. The more stable the jobs market, the more growth we see in housing.