December existing-home sales jumped 6.5 percent, according to the National Association of Realtors (NAR) with unsold inventory falling to 9.3-month supply. The Conference Board’s Index of Leading Economic Indicators (LEI) also rose for the first time in months, which may be a sign that economic activity is beginning to stabilize.
But concerns about the faltering economy and reluctant home buyers pushed builder confidence in the market for newly built single-family homes down further in January, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI edged down a single point to a new record low of 8 in January.
Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”
Meanwhile, builders are advocating more federal housing aid to jumpstart new home sales. Specifically, the NAHB is advocating for an enhanced home buyer tax credit and a government buy-down of mortgage rates for home purchases in 2009, moves that would rejuvenate demand for homes and trigger significant consumer spending across the board.
"Clearly, conditions in the nation's housing market aren't getting any better, and they aren't going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market," said NAHB Chairman Sandy Dunn. Dunn noted that "The Obama Administration and the new Congress have a tremendous opportunity and responsibility to enact legislation that can spur home buyer demand and jump-start the national economy."
"Builder views continue to track with historically low consumer confidence measures," said NAHB Chief Economist David Crowe. "The fact that there has been microscopic movement in the historically low HMI and its component indexes over the last three months provides further evidence of the need for government action to rejuvenate housing demand. Qualified buyers are clearly in the wings, but they're looking for a significant signal from the federal government that now is the time to return to the market."
The Conference Board’s LEI predicts future economic activity, and “Taken together, the recent behavior of the composite economic indexes suggests that the recession that began in December 2007 will continue in the near term.”
Harlan Green © 2009