The National Association of Home Builders’ July survey of builder confidence showed that less than a fourth of home builders see market prospects as “favorable”. The index dropped to 24 this month, the lowest reading in more than 16 years and the third lowest in the history of the survey. The decline was more dramatic than expected, compared to predictions for a reading of 27.
Patrick McPherron, economist at Moody’s Economy.com, commented that “the bottom of the housing market appears nowhere in sight”. Indeed, we see no reduction in inventories, slumping prices and low buyer activity. With mortgage lenders tightening their credit standards, affordability is becoming even more of an issue. After last week’s downgrades of securities backed by subprime loans, Moody’s is now placing under review deals issued by Bear Stearns and IndyMac, backed primarily by first-lien Alt-A mortgages.
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