US Homebuilder Confidence Plummets

Confidence among US homebuilders plummeted unexpectedly in January to the lowest level since June, indicating that the recovery in the housing sector may stall in the forthcoming months.

The National Association of Home Builders/Wells Fargo index of current single-family home sales fell to 15, from 16 in the previous month. The confidence levels remain significantly below 50, a level where most respondents view conditions as poor. The drop in sentiment was broad-based, led by the West, which fell to 16 from 19. While confidence dropped to 22 from 23 in the Northeast, it fell to 11 from 12 in the Midwest and scaled down to 16 from 17 in the South.

The report also reflected that traffic was at a ten-month low, clearly indicating that the extension and expansion of the government’s first-time buyer program has not yielded results. With foreclosures projected at a record 3 million this year, home prices may come under additional pressure, making it tough for homebuilders to turn a profit.