The latest data in the Housing Market Index, HMI, that measures the nations's housing demand slips to the lowest level in its present cycle. It's put together monthly by the National Association of Home Builders and Wells Fargo. The survey focuses on three key areas; builder outlook for current single-family house sales, overall sales projections for the next six months and the amount of traffic by prospective buyers.
The subprime lending woes are giving builders major trouble. Now that lenders are forced to operate under new and tighter underwriting guidelines, fewer buyers can qualify. The finance incentives that are out there are creative, but can only make a marginal difference. Financing, I'm afraid, is a segment that isn't going to change for the better anytime soon.
In my view the bigger problem is the psychology of the house-buying consumer. He's confused. Uncertain. Everywhere he looks he sees and reads about the home builders having a rough time moving inventory. He reads about existing house sales so sluggish the average sale time has doubled from a year or two ago. Internet brings him more bad news in the form of the mortgage industry struggling with delinquencies and foreclosures. This barrage can make anyone nervous and reluctant to commit to a major purchase.
It's true that residential real estate is in the midst of the low end of a cycle. There's no escaping that. Yet, the media has overplayed the downtrend and in the process made it a little worse than what it is. The pendulum has certainly swung the other way. Remember the days three years ago when the market was hot and the media was aglow about existing home values rising by this much and builder sales offices having customers forming lines to put deposits down on new homes. The media was all over that, too.