Tuesday, June 19, 2007

Homebuilder confidence is dropping

The homebuilder sentiment index, which tracks how builders evaluate the market situation, reached the lowest reading in 16 years in June. The index dropped to 28 from 30 in May, a sign that even more builders are pessimistic about market prospects.

According to the National Association of Home Builders (NAHB), home prices will continue to decline until the end of the year, and housing will be “a drag on economic growth” in 2007. Troubles in mortgage lending are affecting home builders, who “continue to trim prices and offer a variety of non-price incentives” to prospective buyers. Since February, when the index reached 39, builder confidence has been falling steadily, to rates dramatically lower than a year ago. In June 2006, builder sentiment was at 42.

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