Home Builder Confidence Drops to 15-month Low

Home builder confidence declined again in July, this time to the lowest level since April 2009, according to the index compiled by the National Association of Home Builders.

The biggest factors: fewer homebuyers, tight credit and competition from foreclosure properties selling at below construction costs.

Still gnawing at the market for new, single-family homes is the April 30th expiration of homebuyer tax credits which siphoned sales activity from traditionally busier summer months.

“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” said NAHB Chief Economist David Crowe. “That said, we do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year, and that new-home sales will improve by 10 percent in 2010 from 2009.”

The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

In July, the component that gauges sales expectations in the next six months edged down one point to 21 and the component gauging traffic of prospective buyers fell three points to 10.

The overall index fell two points to 14 in July, compared to the previous month.