Bloomberg says:
Confidence among U.S. homebuilders slid in October to the lowest level since record-keeping began in 1985, a sign the crisis in credit markets may deepen the worst housing recession in a generation.
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 14, less than forecast, from 17 in September, the Washington-based association said today. A reading less than 50 means most respondents view conditions as poor.
The meltdown in worldwide financial markets that has clogged credit and sent U.S. stocks plunging is likely to worsen the economic slump. Home sales and construction will probably keep dropping as access to loans is restricted, weighing on growth well into 2009.
"Tight credit standards, rising unemployment and the potential for further home-price declines will continue to dampen housing demand and the still significant housing inventory overhang will continue to weigh on construction activity,'' Stephen Stanley, chief U.S. economist at RBS Greenwich Capital Markets in Greenwich, Connecticut, said before the report.
The builder confidence index was forecast to fall to 17 this month from an originally reported reading of 18 for September, according to the median estimate of 41 economists surveyed by Bloomberg News. Projections ranged from 15 to 20.
Wall Street
Today's report "reflects builders' assessments of the recent events on Wall Street, the rapid deterioration in job markets and the corresponding weakness in consumer confidence,'' NAHB chief economist David Seiders said in the statement. "The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets.''
Other reports earlier today showed the credit crisis is taking a toll on other parts of the economy. Industrial output fell 6 percent in the third quarter, the most since 1991, and a factory index for the Philadelphia region hit an 18-year low this month.
The builders' confidence gauge, which was first published in January 1985, averaged 27 last year. The confidence survey asks builders to characterize current sales as "good,'' "fair'' or "poor'' and to gauge prospective buyers' traffic. The survey also asks participants to gauge the outlook for the next six months.
The group's index of current single-family home sales fell to 14 this month from 17 in September.
Expectations Plunge
The index of buyer traffic decreased to 12 from 14. A measure of sales expectations for the next six months plunged to 19 from 28.
Confidence deteriorated in all four regions, led by declines in the South and Northeast.
U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance homes to pay off mortgages, RealtyTrac Inc., an Irvine, California-based seller of foreclosure data, said on Sept. 12.
The Commerce Department may report tomorrow that builders in September began work on 870,000 homes at an annual rate, the fewest since 1991, according to the median estimate in a Bloomberg survey. Building permits probably also fell.
Combined sales of new and existing homes have fallen 36 percent from their peaks in mid-2005. Home construction has declined 61 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months' worth of sales, signaling homebuilding is likely to continue falling.
Lennar Corp., the second-largest U.S. homebuilder, on Sept. 23 reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.
"The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,'' Chief Executive Officer Stuart Miller said in a statement.
How will the credit crisis affect the homebuilding industry?
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