Monday, March 19, 2007

Homebuilder Confidence Drops

From Bloomberg:

U.S. homebuilders turned more pessimistic this month on concern that buyers will find it harder to obtain loans after a wave of defaults in the subprime mortgage market.

The National Association of Home Builders/Wells Fargo index of sentiment fell to 36 this month from February's revised 39, the first decline since September, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.

Homebuilders, struggling to recover after more than a year of slumping sales, now face the possibility that a surge in defaults on subprime mortgages will make other types of home loans harder to get. That may provide a greater drag on construction as builders hold off starting work on more houses until completed ones are sold.


CBS Marketwatch added:

"This is a strong signal that housing will remain a drag on the economy through spring and probably summer as well," wrote Patrick McPherron, an economist for Moody's Economy.com. He concluded that, after seasonally adjusting the numbers, optimism about prospective buyers was an all-time low.


There has been a pretty big debate between the housing bulls and bears over the last 3-5 months. I have been a housing bear for some time, largely because of the huge inventory overhang. The subprime situation has only increased the level of my bearishness. This news simply ups the ante some more. When industry participants are concerned you have to wonder about the overall health of the industry.