Homebuilder confidence has continued to decrease this year, as buyers are more attracted to more affordable, foreclosed homes at a fraction of the usual price.
The National Association of Home Builders reports that builders' sentiment about the housing market fell to 13, which is the lowest reading since March 2009. Readings below 50 indicate negative sentiment about the market. A reading of 13 indicates an ongoing problem with the housing market and struggling economy. The index has not been above 50 since April 2006.
It's no secret that fewer and fewer people are buying new homes. Although prices have stabilized in 2010, and low mortgage rates are available to those with good credit, the market continues to struggle. Many analysts predict that home prices will drop again this fall, leading to even more problems with new homes.
As reported in the Associated Press, "Buyers just aren't stepping up to the plate." According to one real estate analyst with Weiss Research, "Unless and until the job market improves, we are simply not going to get any traction in the housing market."
Construction plays a significant role in the housing industry. This summer, construction and construction-related jobs have plunged to the lowest level since October. There is little incentive for homebuilders to build new homes.
Consumers - and future home buyers - are obviously worried about the weak economy and poor job market. Of the few homebuyers out there right now, many are choosing deeply discounted foreclosed properties. According to one report, 90 percent of 462 builders surveyed reported that their market has been affected by the rise in foreclosures.
Fewer sales of new homes mean fewer jobs in the construction industry. Job loss in the construction industry can lead to further delays in our economic recovery. When a new home is built, the project equates to approximately three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities. When new homes aren't built, or built less, the impact is felt across multiple industries. This is a huge problem right now.
Because of the rise in foreclosures over the last two years, and homebuyers focusing on these homes for purchase, the building industry has been forced to cut back on resources, projects, and jobs. In June, for example, the number of new homes up for sale fell 1.4 percent from a month earlier to 210,000. This is the lowest level in more than 40 years.
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