Good News, Bad Mood for Housing Industry

Homebuilders may not be feeling great about the residential industry, but the multifamily sector received some good news this week: Construction of housing with two ore more units rose 14.4 percent, and multifamily home groundbreakings increased 14.5 percent.

Yet overall builder sentiment is low, according to the National Association of Home Builders, who said  that its housing market
index for March
was the third lowest reading on record. Buyers are either waiting it out to see if prices fall more or just plain can’t get financing to buy homes, USA Today says.

And homebuilders are feeling the effect: The index came in at 20 in March for the second month in a row. It’s been at 20 or below since September. A reading of more than 50 indicates builder confidence is healthy.

That low confidence was reflected in the Commerce Department data reflected today–which showed future groundbreaking permits reached their lowest level in 16 years. Also:

  • Overall construction declined, with starts dropping 0.6 percent after going up 7.1 percent in January.
  • That January number was higher than originally thought–the Commerce Department had reported that housing starts were 0.8 percent higher in January. But the increase provided little comfort because of last month’s drop in starts. January, it seems, may have just been a blip on the radar–and we didn’t even realize it was a decent blip at the time.
  • And the annual comparison isn’t very hopeful, either: Housing starts last month were 28.4 percent lower than in February 2007.

Homebuilders don’t feel the slump is near over. Buyers clearly don’t either, if they’re still waiting for prices to fall further before they buy.

The same can be said of lending institutions–if they’re still being strict about loans, which is preventing home purchases for some buyers, it doesn’t seem they’re so sure the situation is close to being straightened out, either.

What needs to change first–buyer enthusiasm? Lender availability? Builder confidence? Homebuilder positivity will probably come last; but who most needs to light a fire under themselves to get the housing market moving: Banks or buyers? What do you think?