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TheStreet Open House

Homebuilders' Perfectly Terrible Storm

Stocks in this article: XHB CHCI PHM LEN DHI KBH BZH ITB

NEW YORK ( TheStreet) -- Homebuilder sentiment fell to an eight-month low in June as a perfect storm of weak existing-home prices, rising material costs, distressed property sales and sluggish consumer confidence brewed in the housing market.

"Builders are being squeezed by the continuing weakness in existing-home prices - against which they must compete -- as well as rising material costs," said Bob Nielsen, a home builder from Reno, Nev., and chairman of the National Association of Home Builders.

"In addition to the ongoing impacts of distressed property sales on home prices, appraisal values and consumer confidence, rising costs for materials such as roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs."


Nielsen is far from alone in his view.

Data released by NAHB Wednesday morning showed that its index of builder sentiment plunged 3 points in June as confidence waned and the economic recovery stalled.

The NAHB Housing Market Index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in several points lower at a reading of 13 in June, much lower than the reading of 16 economists had expected, according to consensus estimates listed on Briefing.com.

Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006. It had held steady at a reading of 16 for six of the past seven months.

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