Predictable: Builder Sentiment falls on Tax Credit Expiration
Builder sentiment, never high, has fallen even further. This is one more indication of the yo yo effect that comes into play from meddling government. Congress, is trying to postpone the inevitable, another sharp decline in housing prices. It won't work, and even if it did the unintended consequences would make it not worth the investment.
Foreclosures and REOs on the companies balance sheets as can seen by the Texas ratio are as high as they have ever been and are not getting any better. To think that we can postpone the inevitable is foolhardy at best and destructuive at worst.
As an aside, we will also see a big drop in revenue as profits shrink due to the changing incentives of tax increases. Incentives matter, and to increase taxes in the middle of a recession is about as irresponsible as you can get.
“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, Mich. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels.”Via Reuters:
The NAHB/Wells Fargo Housing Market index dropped 5 points to 17, the sharpest point decline since November 2008, the group said in a statement. The sharper-than-expected decline followed two successive increases as the tax credit ran its course.
Economists polled by Reuters had expected the index to fall slightly to 21. A reading below 50 indicates more builders view sales conditions as poor than good. The index has not been above 50 since April 2006.