Builder Confidence Level Remains at Record Low – December 2008
The National Association of Builders released its monthly Builders Confidence report today called The National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  It came in at 9 – tied for the equivalent low in November 2008. The recent peak for this was mid 2005 when the readings were in the low 70′s.  It’s been straight down from there – see this chart that Calculated Risk publishes.
This quote is telling as to the state of the market:
“The crisis continues,†said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W. Va. “While builders are doing everything we can in the way of price and non-price incentives to move new homes off the books, buyers are afraid to move forward, and in any case there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures.
There are still too many builders building homes in this market. They cannot compete. It’s my opinion many builders need to go find something else to do.
I have been telling my clients for some time that the foreclosures and distress sales are the tip of the spear and driving everything in this market. It used to be the new home builders who led the market in terms of price, styles, floor plans etc. They are now all taking the back seat to the banks and it’s beyond their control.
Last week I published “Twin Cities Bank Foreclosures- 10 Things You Need to Know Now” where I discussed in detail how the banks are pricing property today and how transactions are coming together. Banks are also starting to price their properties under market value in many other parts of the country. We’re starting to see more of that in the Twin Cities with each passing day.  Below is a chart depicting how banks are starting to price property. It was originally published in “Pricing Property in Today’s Declining Market.”
Most everyone is looking first at the foreclosures and distress sales. They might then entertain a finished spec home by a builder who needs to unload. Then, if those two sources of supply don’t meet the buyer’s need, the buyer moves on to traditional sellers. If those builders and traditional sellers aren’t priced really aggressively, they will just continue to sit with their home listed on the market.
