Foreclosures vs. Homebuilders: Guess Which Side is Ahead?

Homebuilders vs. ForeclosuresBuilders of single-family homes feel they have yet to make strides against an overwhelming number of discounted foreclosure deals, weak buyer demand and tight credit standards to fund new projects.
Add a nasty winter season and you have an anemic 15 for March in the Housing Market Index from National Association of Home Builders/Wells Fargo, representing a 2 point drop from the previous month. 
“The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time,” said NAHB Chief Economist David Crowe.
He also said the inventory of new homes on the market is “at an extremely low level” and builders expect a 25 percent improvement in new-home construction in 2010, compared to last year. The projected increase will hopefully rebuild inventory and “meet expected pent-up demand,” Crowe said.
By falling to 15, the index returned to its January level.
The NAHB/Wells Fargo Housing Market Index measures the outlook builders hold for current single-family home sales and sales expectations.
They are asked to rate prospects for the next six months as good, fair or poor. The survey also asks them to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” 
Scores from both categories are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The index varies depending on the region. The Northeast posted a five-point gain to 23; the West a one-point gain to 15; the Midwest slid three points to 10; and the South slipped one point to 18.
“Unusually poor weather conditions certainly had a negative effect on builders’ business in February,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “At the same time, the continual flow of distressed properties priced below the cost of production is having an adverse effect on new-home appraisals and also making it tough for builders’ customers to sell their existing homes.”

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