This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Homebuilder Confidence Still High but Buyer Optimism Wanes

NEW YORK (TheStreet) -- Homebuilder confidence remained high in September but signs of waning interest from homebuyers are a cause for concern.

The National Association of Homebuilders/Wells Fargo Housing Market Index, which measures builder confidence in the market for newly built single-family homes, had a reading of 58 in September, unchanged from the previous month.

The index gauges builder perceptions of current single-family home sales and sales expectations in the next six months as well as their perceptions of traffic of prospective buyers.

A reading over 50 indicates that more builders view conditions as good rather than poor.

While builder confidence has remained steady, many are reporting hesitancy on the part of buyers due to the sharp increase in mortgage rates.

"Following a solid run-up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue," noted NAHB Chief Economist David Crowe.

On Wednesday, the Census Bureau will release housing starts data. Homebuilders are expected to have begun construction on 915,000 homes on an annualized, seasonally adjusted basis in September, according to economists polled by Bloomberg.

Builders have actually been slow to ramp up construction despite a shortage of inventory in the market. With the high cost of land, materials and labor, and tight credit conditions, builders have chosen to keep inventory lean and raise prices to boost their margins.

But with buyer demand waning, homebuilders may have to reconsider their recent price hikes.

Meanwhile, construction activity still is well below normal, according to Trulia's Jed Kolko. That's because the vacancy rate nationally is 10.3%, close to its recession-era peak. There isn't a shortage of housing, just a shortage of homes for sale.

Also, household formation at the rate of 746,000 annually is also half of what is considered normal.

Household formation and construction won't go back to normal unless the jobs market booms and young adults begin to re-enter the housing market.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs