Homebuilder confidence worsens in September

Homebuilder confidence for newly built, single-family homes dropped in September as the market remains stymied by a glut of foreclosures and trepidation among potential buyers.

The National Association of Home Builders said Monday that its index of builder sentiment fell to 14 from 15 this month. The index has risen above 20 for only a month in the past two years, and has held between 13 and 16 for six consecutive months, the report said. 

Any reading below 50 indicates negative sentiment about the housing market — a height that hasn't been reached since April 2006.

"The fact that the HMI continues to hover within such a narrow, low range reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate," said David Crowe, NAHB 's chief economist.

"While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market."

New home sales dropped to record-low levels last year and are on track for equally dismal numbers in 2011. 

Builders are struggling to compete with foreclosures, which are typically less expensive than new homes. While mortgage rates are at record-low levels, potential homebuyers are having trouble getting loans and scraping up enough money for rising downpayment requirements. Many homeowners are underwater on their mortgages, making is nearly impossible to sell. 

"Very little has changed in terms of housing market conditions so far this year," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. 

"Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit."

The housing market index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view conditions as good than poor.

Each of the index's three component indexes recorded declines in September. The component gauging current sales conditions slipped a point to 14, while the components gauging sales expectations in the next six months and traffic of prospective buyers each declined two points, to 17 and 11, respectively.

The Midwest was the only region to post a gain ifor September, edging up one point to 11. Meanwhile, the Northeast and South each posted two-point declines to 15, and the West posted a three-point decline to 12.