Builder confidence hits record low
Builder confidence in the market for newly built single-family homes fell to a record low of 16 in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It was the third consecutive month the index declined, and the 16 replaced the previous record low of 18 in June.
The index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.”
The HMI’s three components also hit record lows in July. The index gauging current sales conditions declined one point to 16; the index gauging sales expectations in the next months fell four points to 23, and the index gauging traffic of prospective buyers also receded four points to 12.
“Builders are reporting that traffic of prospective buyers has fallen off substantially in recent months,” said NAHB Chief Economist David Seiders.
All but one region showed declines in builder confidence in July. The Midwest declined 6 points to 10, its lowest HMI score since the regional detail was introduced in December of 2004, while the West matched a record low set in January 2008 with its three-point decline to 13. The South posted a one-point decline to 20. The Northeast was the only region to post a gain in July, rising two points to 14 from the previous month’s record low of 12.
NAHB president Sandy Dunn, a home builder from Point Pleasant, W.Va., advocated on behalf of the trade group for several additional reforms to help stimulate the housing market – namely, Congressional action on a housing bill that would provide a temporary tax credit of up to $8,000 for first-time home buyers, with the aim of “helping to stimulate sales, reduce the inventory of unsold homes on the market, stabilize house prices and arrest the rapid deterioration of mortgage credit quality.”
Housing starts rose between May and June
Housing starts rose 9.1 percent month-over-month to a seasonally adjusted annual rate of 1.066 million units, according to the U.S. Department of Commerce. That figure is 26.9 percent below the June 2007 rate of 1.458 million.
Of those, single-family housing starts in June fell 5.3 percent to a rate of 647,000.
Housing completions in June were at a seasonally adjusted annual rate of 1.167 million, 1.2 percent above the revised May estimate of 1.153 million. That figure still is 21.7 percent below the revised June 2007 rate of 1.491 million.
Building permits in June were at a seasonally adjusted annual rate of 1.091 million, 11.6 percent higher than the May rate of 978,000. That figure is 23.9 percent below the June 2007 rate of 1.433 million.
Earnings fall at Stock, Ferguson
Wolseley, the parent company of Stock Building Supply and Ferguson Enterprises, reported an 8 percent drop in revenues for its North American division during the 11-month period ended June 30, 2008. Earnings for the division, which also includes Wolseley’s Canadian operations, fell 46 percent.
Stock’s loss for the 11-month period was $203.8 million, compared to a $104 million profit in the comparable period last year. Revenues were down by 25 percent, reflecting a 22 percent decline in same-store sales. Wolseley executives blamed the results on increased price competition and pressure on gross margin at Stock, combined with the continued slowdown in housing starts.
Ferguson has benefited from the continued strength of the commercial and industrial sectors but suffered some weakness from declines in the residential and remodeling markets, according to Wolseley. Revenues for the plumbing and HVAC distributor’s 11-month period were marginally up due to acquisitions, while organic revenue declined by 3 percent. Ferguson’s profits were 10 percent lower than in the previous year, primarily due to costs associated with the restructuring announced in May. Ferguson has closed 75 branches since that time.
In a statement about its European operations, Wolseley noted that “there has been a rapid deterioration in market conditions in the U.K, particularly with new housing, and many other European markets continue to soften. The Group continues to focus on cost reduction and cash flow enhancement.”
Headquartered in Reading, England, Wolseley is an international building materials distributor with nearly 5,000 branch operations in 28 countries. It is listed on the London Stock Exchange.