WASHINGTON – Confidence among U.S. homebuilders was little changed in May as executives turned more pessimistic on the outlook for sales, a sign any pickup will take time to develop.
The National Association of Home Builders/Wells Fargo sentiment index held at 16 this month, lower than the median forecast of economists surveyed by Bloomberg News which projected it would increase to 17, data from the Washington-based group showed Monday. A measure of sales expectations for the next six months fell to an eight-month low.
Renewed declines in real-estate values and more unsold homes in the foreclosure pipeline mean builders are reluctant to undertake new projects. Unemployment at 9 percent and stagnant wages signal demand for new homes will be slow to develop.
“It’s hard to be a homebuilder right now,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York, said before the report. “Demand for new homes has remained weak and will likely continue to be sluggish into the new year.”
Another report on Monday showed manufacturing in the New York region expanded at a slower pace than anticipated in May as the cost of raw materials surged. The Federal Reserve Bank of New York’s general economic index fell to 11.9 from a one-year high of 21.7 in April. Readings greater than zero signal growth in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
The homebuilder measure has been at 16 in six of the last seven months. Readings lower than 50 mean more respondents said conditions were poor. Projections among the 48 economists surveyed ranged from 15 to 18.
Recession’s Low
The gauge, which was first published in January 1985, reached a record low of 8 in January 2009, and averaged 54 in the five years before the recession began in December 2007.
The builders group’s index of sales expectations for the next six months decreased to 20, the lowest level since September, from 22. A gauge of current single-family home sales improved to 16 from 15, while the index of buyer traffic rose to 14 from 13 last month.
“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,” Bob Nielsen, chairman of the industry group and a builder from Reno, Nevada, said in a statement.
The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.
Regional Breakdown
Builders in two of the four regions saw a decrease in confidence this month. The biggest drop was among those in the Northeast. Sentiment also fell in the West, was little changed in the Midwest and rose in the South.
The Commerce Department may report Tuesday that housing starts rose 3.5 percent in April to 568,000 units at an annual rate, according to economists’ forecasts. Starts have moved up from a 512,000 level in February, which was the lowest since a 477,000 pace in April 2009, the weakest on record.
Sales of existing homes, which make up more than 90 percent of the market, rose 2 percent to a 5.2 million annual pace in April, economists surveyed by Bloomberg forecast the National Association of Realtors may report on May 19. Existing home sales have been gaining market share from new homes due to growing demand for lower-priced distressed homes.
‘Shadow Inventory’
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million unsold existing homes already on the market.
Toll Brothers Inc. CEO Douglas Yearley Jr. last week said the home selling season so far this quarter has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into 2012, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop.
Jeffrey Mezger, chief executive officer of Los Angeles- based KB Home, said he expects sales to “bump along for the next 18 months.”
