Homebuilders' confidence in a near-term housing recovery sank to a new all-time low this month, reflecting growing worries over the U.S. financial crisis, rising unemployment and weakening consumer confidence, an industry trade association said Tuesday.
The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled five points to nine in November. The index stood at 14 in October after slipping three points from September.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
"Today's report shows that we are in a crisis situation," NAHB Chairman Sandy Dunn said in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back."
In recent weeks, homebuilders have ratcheted up pressure on Congress to take steps that go beyond trying to reduce foreclosures. the industry wants lawmakers to enact new incentives aimed at getting reluctant homebuyers back into the market.
Specifically, they're asking for a 10 percent tax credit of up to $22,000 for homebuyers that purchase a home over the next year and a temporary interest-rate reduction on 30-year mortgages.
"The housing downturn has already cost America three million jobs in construction and related industries, and this downward momentum cannot be stemmed without substantive government intervention," said David Crowe, the association's chief economist.
The builders' proposed housing aid measures would cost the government an estimated $270 billion, and would amount to a short-term fix at best, Deutsche Bank North America analyst Nishu Sood concluded in a research note earlier this month.
Builders have grown increasingly convinced that only government intervention will help stem the downward spiral in home prices and rising foreclosures that have led to a dearth in demand for new and preowned homes.
Major public builders such as D.R. Horton Inc., KB Home, and Centex Corp., have seen their stocks hammered as housing woes have worsened.
The latest builder index reflects a survey of 422 residential developers across the U.S., tracking builders' perceptions of market conditions.
Builders' gauge of current sales conditions tumbled six points to eight, while the index of foot traffic by prospective buyers fell four points to seven. Builders' expectations for sales over the next six months remained at 19, the NAHB said.
Declines in builder confidence were seen across the U.S., with the biggest drop in the Midwest, where confidence declined by six points. The other regions — Northeast, South and West — saw builder confidence slide by five points.