Housing Market Indicators Are Downbeat

Available housing market indicators display considerable weakness in October, and early signals for November are hardly encouraging.

The National Association of Home Builders’ (NAHB) monthly single-family Housing Market Index (HMI) hit a record low of 14 in October, and preliminary tabulations point toward an even weaker reading for November (to be released on Nov. 18). All three components of the HMI ¯ current sales, buyer traffic and sales expectations — are at record lows in the four major regions of the country, the association says. The decline in the HMI has been particularly striking in the West region.

NAHB’s proprietary survey of 30 large single-family builders has confirmed considerable weakening of housing demand in October. Gross sales (new orders) fell sharply on a seasonally adjusted basis, the number of sales cancellations ticked up, and net sales registered a very large decline for the month.

Seasonably-adjusted cancellation rates calculated from our big builder survey moved up in October, whether measured relative to current gross sales or to the backlog of signed sales contracts. These increases essentially wiped out improvements that had occurred in earlier months of the year.

In October, NAHB asked single-family builders of all sizes about their building plans for the first half of 2009, compared with the pace of activity in the second half of this year. Fifteen percent said they plan to start more units in the first half of next year, but half of all respondents said they plan to start fewer units.

On balance, the survey results point toward lower single-family starts during the first half of 2009.