Homebuilder confidence hits 15-year low
Association says builder optimism has dropped as the number of unsold houses has risen.
September 18 2006: 2:27 PM EDT
NEW YORK (Reuters) — U.S. homebuilder optimism sank for an eighth consecutive month in September to the lowest level in more than 15 years, with a surge in the backlog of unsold homes putting development on ice, an industry survey showed on Monday.
The National Association of Home Builders said its index of homebuilder sentiment sank 3 points in September to 30, the lowest since February 1991, when the economy had slipped into recession. August’s figure had been revised upward to 33 from 32.
The NAHB said its gauge of sales expectations for the next six months fell 4 points to 37, indicating members see further downward momentum in the housing industry. The measure for current sales of new homes declined 5 points to 32.
“It’s about a degree of oversupply and how builders will work it down,” including cutbacks on new construction, said NAHB Chief Economist David Seiders. Many buyers on the sidelines are unmoved by “substantial incentives,” so price cuts are becoming more frequent, he said.
A reading below 50 means more builders view sales conditions as poor rather than good.
Builders continued to report increases in cancellations of sales contracts and inventories of unsold homes, especially for the bigger companies, Seiders said.
Inventories of existing homes have soared 40 percent over the past year to 3.86 million units, or a 7.3 months’ supply at the current sales pace, according to the National Association of Realtors real estate group.
Seiders last week told Congress that the slump in home sales and production will not bottom out until mid-2007, even though growth in jobs and income is supportive of the sector. House prices are expected to be flat in coming months and declines are a “distinct possibility,” he said.
The NAHB’s gauge of prospective buyer traffic was unchanged at 22 in September. While stable, the level does not indicate stabilization in the market, Seiders said.
“Builders are adopting an increasingly cautious attitude in their near-term outlook for new home sales,” he said.
http://money.cnn.com/2006/09/18/real_estate/homebuilder_sentiment.reut/index.htm
jt8
“Success is not the key to happiness. Happiness is the key to success.” –Albert Schweitzer
Replies
I'm confident that there is no shortage of fish...
so I'm covered...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming
WOW!!! What a Ride!
Forget the primal scream, just ROAR!!!
so does that mean you wanna thin out the fish population along with the liberals? lol Alfred E. Newman for president (we'd be better off)
would that put you in jeperdoy either way???
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
only if Bush is in office : ) Alfred E. Newman for president (we'd be better off)
thought there was something fishy about what you said...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
still love ya bro...lol Alfred E. Newman for president (we'd be better off)
For many years I built high end custom homes and when times got tough I had more work. When times got easier I had less work. The safest way against unemployment is doing quality work. Ever notice who lasts and who doesn't? The cheapest companies and businesses fail more often and seldom last very long. They rely too much on price and not service and quality.
gb93433,
I'm glad you're covered.. the reality is most aren't.. there are only so many buyers with high end money and if the market for low to middle priced homes is in free fall then those on the upper end usually have more builders trying to survive..
An oversupply of anything results in lower prices. Simple basic economics..
Few owners really understand things of lasting value.. if you are "hot" because you make burlap covered wine racks or whatever, sooner or later someone will imatate you. when they do the price drops.
That makes something more affordable, which is exactly what the wealthy don't want.. if it's common they really aren't interested.. what they want is to show off their wealth.
If you have the ability to make something extremly unique something which cannot be immataited then as long as the wealthy see that as something diserable.
One of the things I saw when I was learning, was that the man I worked for always had work and he was one of the highest priced contractors in the area. The one thing that separated him from the rest was his skill and attention to detail. We never had to return on any job because of poor work.You are right there are only so many people with money. Most people getting married will buy their spouse a gold ring and not a piece of plastic. A lot of it has to do with what they value. Not everyone buys a gold ring with a huge diamond but most buy a genuine ring. Personally I would rather build someone a 1500 square foot modest well built home than 10,000 square feet of junk.It is usually the wealthy who pay for nice work. However, I have not always done work for the wealthy but I have always done work for people who want nice work. Years ago I was called by a elderly homeowner to do some work on their home. It was easy to tell that they did not have much money but they needed the work done. So I agreed to do some of the work for very little and their children came by and did what I told them to do. The work was done with the agreement that they would not tell anyone what I charged. When you do nice work and get paid well, you can do work like that for little or nothing and help those who need it. The person who is highly skilled can do work that is very demanding and also do work that is done easily. That opens him up to all kinds of possibilities. The work he can do is not limited by his lack of skill.
gb93433,
You are correct.. If you are extremely well skilled in a field where there is demand then you will stay busy and earn a good living.
However, building houses isn't exactly brain surgery. Mistakes can be covered up. Tolerances used for framing are at complete odds with tolerances needed for trim work. Yet most trim goes on and looks pretty decent.. Sometimes the framer working to a loose 1/4 inch tolerance winds up installing cabinets which have a 1/16th or less tolerance..
It's more a matter of technique than any real precision..
Once your method for dealing with issues are known, then others are free to compete. As the field of willing and capable workers increases then prices are forced down..
What can't be competed with successully is reputation..
If you have a reputation for excellance and it's not just something in your head but accepted by those with the means to afford to pay a premium then you are indeed in a lucky position..
I've sold equipment to contractors who's opinion of their own work demanded a premium. When the crunch hit this spring with the huge number of unsold new houses in our area they were the first on the sidelines.. They are either now out of the contracting business or nearly so..
There is a framer who can frame a 2400 sq. ft. two story house, install windows and doors and get it past inspection inside a week with just him and his two sons..
He is still booked solid thru the winter, because contractors know that by cutting off at least a week off of building time is more than worth his premium.
I would agree with you in many ways. However, one has to find the piece of the pie he is happy with and is capable of doing. My piece of the pie was what I felt had kept a number of businesses outside of construction in business for more than 75 years. I have never seen the cheapest person stay in business through the ups and downs. It was the high quality person who stayed through the ups and downs.Of course if you are trying to build chicken coops you won’t find many takers in downtown San Francisco. If you want to build palaces you probably won’t find many in rural Missouri and Arkansas.My wife’s grandfather built homes in Nebraska for about 35 years and worked for his dad as a youngster. His dad had come from England. The son had gotten very good training during the time he worked for his dad. Even to this day those homes go for more money because people trust the name associated with the proven workmanship. The town was never over 6,000 people until recently. He stayed busy because people trusted him to do what he said he would do. He was not the cheapest. During his years there were those who came and left leaving their mark or cheap price and poor quality. The people who had lived there for years would laugh and what they saw being done by a new contractor who thought he could do better. But they just folded up and left. The people who bought the poor quality homes were those who had just moved to town.The contractor I learned from in California required us to plumb and line the walls well. We lived in an area that required good work because there was a tradition among the contractors unlike most other places I had visited. Many of us were friends and would give each other work. We helped each other. Typically the contractor I worked for got cheaper bids on so many things because the subcontractor did not have to deal with poor quality. We figured it was about ten percent difference. The same thing happened to me as well. That is a lot of money on a home. I consider myself fortunate in that I learned from a man who was highly skilled and I did not know it until later. He was the same person who helped me go into business. He knew that his time in business was coming to an end. He was getting older and it was an opportunity few people get. In may ways I was like his son. When I am working I am reminded of him because of what I am able to do and the satisfaction it brings. When he died the church was packed and the local lumber yard shut down for the funeral. Many of the city officials were there. If you did not know the man you had to know something was going on the day of the funeral. When all is said and done we cannot take any more with us than we came with.
My builder, which started this 109-home planned community as an Atlanta suburb off the interstate, is in phase three, but there still seven lots in phase two he hasn't even bothered breaking ground on yet.
The lack of sales over the past seven years is more of a condition of missing quality than the economy. I've seen communities within walking distance going from -50% to 150% what the homes in my community go fo begind breaking ground and finish the development while mine puts around like the idiot he is.
For instance, I watched a six year old home two doors down having a roof replaced. Yessir, the removal and installation of a new roof. Why? Well, when a Latino can use his left hand (and not both) to grab a 4'x6' section of shingles and remove them effortlessly, that says a lot about the build quality. Keep in mind I had a 6'x7' section blown clear off my six year old home. The shingles were in great condition, but their installation was non-existent--like the builder.