Confidence among U.S. homebuilders in September unexpectedly held at the lowest level in more than a year, showing the housing market remains depressed following the expiration of a government tax credit.
The National Association of Home Builders/Wells Fargo confidence index was unchanged at 13, matching the August reading as the lowest since March 2009, data from the Washington-based group showed today. The gauge was projected to rise to 14, according to the median forecast of 50 economists surveyed by Bloomberg News.
Home sales will be slow to improve as unemployment hovers near 10 percent and foreclosures mount, preventing builders including Hovnanian Enterprises Inc. from taking advantage of record-low mortgage rates. A tax incentive of as much as $8,000 provided only temporary relief for housing, the industry that precipitated the worst recession since the 1930s.
“The housing-market recovery will be lackluster for years,” Ellen Zentner, senior U.S. macro economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “As long as the unemployment rate remains high, it’s going to be difficult to get the level of foreclosures under control.”
Stocks held earlier gains after the report. The Standard & Poor’s 500 Index rose 0.6 percent to 1,132.07 at 10:05 a.m. in New York. The S&P Supercomposite Homebuilding Index climbed 2 percent to 235.49, propelled by better-than-forecast earnings at Lennar Corp.
Index readings lower than 50 mean more respondents said conditions were poor. Estimates in the Bloomberg survey ranged from 12 to 15. The measure reached a record low of 8 in January of last year.
The builders group’s index of current single-family home sales was 13 in September and the measure of sales expectations for the next six months was 18, both unchanged from August. The gauge of buyer traffic dropped to 9, the lowest level since March 2009, from 10.
“Builders haven’t seen any reason for improved optimism in market conditions over the past month,” NAHB Chairman Bob Jones, a homebuilder from Bloomfield Hills, Michigan, said in a statement. “If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential homebuyers feel more secure about the job market and the economy.”
The confidence gauge fell to 12 from 15 in the Midwest and to 16 from 18 in the Northeast. It was unchanged at 8 in the West and improved to 14 from 12 in the South.
Work began on 550,000 homes at an annual pace in August, up from 546,000 the prior month, according to the median forecast of economists surveyed before a Commerce Department report tomorrow. Housing starts plunged to a record-low 477,000 pace in April 2009 after reaching a three-decade high of 2.27 million in January 2006.
Reports later this week are projected to show sales of existing and new homes climbed last month, according to the median forecasts in Bloomberg surveys. The National Association of Realtors is scheduled to release figures on sales of previously owned houses on Sept. 23 and the Commerce Department will report on new home purchases the following day.
The government’s homebuyers credit required contracts by signed by April 30. Combined with joblessness and sagging consumer confidence, the end of the homebuyer credit prompted a decline in orders at Hovnanian. The largest homebuilder in New Jersey said on Sept. 1 its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.
“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.
Builders and sellers are competing with rising foreclosures, which means homes stay on the market longer and prices are restrained. Home seizures reached a record for the third time in five months in August, RealtyTrac Inc. said Sept. 16.
Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents this month to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York. Brokers were told to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to a two-page memo addressed to GMAC preferred agents dated Sept. 17 and obtained by Bloomberg News.
Miami-based Lennar is among companies finding other ways to boost earnings. The fourth-largest U.S. homebuilder by revenue today reported a third-quarter profit on widening margins on house sales and growing revenue at its distressed investing unit.
The Obama administration has said it plans to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.
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