After two consecutive monthly gains, builder confidence in June for the newly built single-family home market fell back to February levels, before the beginning of the home buyer tax credit-related surge, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released Tuesday, June 15.
The HMI in June dropped five points to 17.
"The home buyer tax credit did its job in stoking spring sales and we expected a temporary pull back in the builders' outlook after the credit expired at the end of April," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Michigan. "However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels."
Each of the HMI's component indexes recorded declines in June. The component gauging current sales conditions fell five points to 17, while the component gauging sales expectations for the next six months declined four points to 23 (from a one-point downward revised index level of 27 in May) and the component gauging traffic of prospective buyers fell two points to 14. The HMI posted losses in every region of the country.
Analysts at High Frequency Economics (HFE) in Valhalla, New York, predicted that the pipeline of prospective buyers would dry up, judging from the "startling plunge" in mortgage applications in the weeks since the expiration of the tax credit on April 30.
Meanwhile, the NAHB's chief economist said the association had expected some softening in the market following the expiration of the home buyer tax credit, and this report verified that assumption.
