October certainly is proving to be the cruelest month for builders. According to the NAHB-Wells Fargo Housing Market Index, builder confidence plunged into single-digit territory in October with a historically low reading of 9.
Yes, nine. Out of a possible 100.
Those results are significantly lower than the expectations of analysts, who had projected a reading of 14. But a terrible economy, tight lending situation, and the loss of seller-funded down payment assistance as of Oct. 1 are clearly affecting builders, buyer traffic, and sales.
Current single-family sales, one of the HMI’s three components, tumbled six points to a reading of 8 in October. Buyer traffic proved even more scarce, with that dropping four points to a reading of 7.
“A lot of people are going directly to banks” before even visiting sales centers, said Jeff Burton, president of American Dream Development, a small builder in Junction City, Kansas. “We are not having contact with people who are just looking. They are either coming pre-qualified [for a mortgage] or they are not coming at all.”
Yet somehow builders are retaining some shred of optimism; the reading for sales expectations over the next six months stayed steady at 19.
Perhaps that’s because in terms of consumer psychology, October and its uncertainty–particularly about who would be elected president–may have been a watershed month. At Holiday Builders in Florida, President and CEO Kim Shelpman says she has noticed an improvement in buyer traffic since the election, during a typically slow period for sales.
“I’ve heard a whole different attitude from our sales force,” Shelpman says. “They’ve got multiple leads that they are working, not just one. The entire confidence level has gone through a tweak–I’m not going to say we’re in correction mode, but I do have my fingers and toes crossed that we have gone to the worst place and that buyers are now regaining some confidence…It’s a small glimmer of hope, but we’ll take it.”
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Manhattan, KS.
