Low Consumer Confidence Continues to Hurt Home Sales

The slumping economy and the turmoil in financial markets have laid heavy hits on consumer confidence and consumer spending, and home sales definitely have been pushed down in the process — with the possible exception of foreclosure-related sales of existing homes at fire-sale prices, according to the National Association of Home Builders (NAHB).

Those sales actually have contributed to downbeat price expectations and detracted seriously from sales of new homes.

NAHB’s proprietary survey of 30 large single-family home builders (accounting for roughly one-fourth of all for-sale housing in the U.S.) shows ongoing erosion of both gross and net sales of new homes through September — both before and after seasonal adjustment.

Cancellation volume naturally has been falling as the backlog of signed sales contracts has trended sharply downward, but cancellation rates — measured relative to current sales volume or to the contract backlog — are not far off the record highs posted about a year ago.

NAHB’s single-family Housing Market Index (HMI) fell back to a new record low of 14 in October, following a slight increase in September. All three components of the HMI —— current sales, sales expectations and buyer traffic — registered record lows in October and all major regions were at or close to their record lows.

We’re expecting further declines in home sales, house prices and housing production as the year progresses and it’s extremely difficult to pinpoint troughs for any of these measures.

Furthermore, downside risks to our short-term forecasts are proliferating, accentuating the need for additional policies