It’s not “unexpectedly,” at least not any more. The Associated Press has finally put the pattern of economic indicators together and concluded that the American economy has slowed, and the latest index from the National Association of Home Builders is yet another milepost to Recovery Bummer:
Homebuilders’ confidence in the housing market has sunk to the lowest level in more than a year, more evidence that the economic recovery is slowing.
The National Association of Home Builders said Monday its seasonally adjusted housing market index fell to 14 in July. It was the lowest level since March 2009. June’s index level was revised downward to 16.
Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006.
Builders are reporting a sharp drop in the number of buyers looking for new homes now that federal tax credits of up to $8,000 have expired. Those incentives ended on April 30, although buyers who signed contracts by then have until September 30 to complete purchases.
The actual sales numbers from June haven’t yet arrived, but the level of sales in May hit a low-point rate that hasn’t been seen in 40 years. Even with the anemic building activity since then, the current inventory of new homes will take almost nine months to sell at current rates. Thanks to the artificial stimuli applied to home sales, demand for new homes will not likely rebound, as qualified buyers made their moves while tax subsidies existed for the sales. Nine months, even at this level of inventory, may be optimistic.
How will this impact the general economy? AP reporter Alan Zibel estimates that each new home built creates about $90,000 in economic impact to the local economy in labor, materials, permits, and so on. The lack of new construction in many communities will hit local government and jobs hard. Since summer is traditionally a big season for this kind of activity, it looks as though this could be a lost year in the new-homes market.