Home builder confidence drops as housing market sags after tax credit

Home builder confidence declined for the second straight month in July to its lowest level since April 2009, a signal that the tax credit expiration could hamper the housing market's recovery. 

The index dropped to 14 in July, before the forecast, down two points from a downward revised 16 from 17 in June, the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.

"The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy," said NAHB Chief Economist David Crowe in a statement. 

"That said, we do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year." 

Crowe expects that new home sales will increase 10 percent from 2009 to 2010. 

With the expiration of up to an $8,000 tax credit at the end of April, builders were reporting hesitant homebuyers because of continued uncertainty about the economy and job markets combined with tighter consumer credit. 

"We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program's deadline," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich., in a statement.