Housing Market - No Bottom in Sight!

The homebuilder confidence index fell even further this month. From the NAHB:

"A surplus of unsold homes on the market, combined with ongoing concerns in the subprime mortgage arena and affordability issues associated with tightened lending standards and higher interest rates, continues to take a significant toll on builder confidence, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI declined four points to 24 this month, which is its lowest level since January of 1991."

(An index level of 50 indicates that half of those polled have a favorable view.) The article continues with the claim that house sales should increase later this year, with a continued rebound into the start of next year. I say they're crazy. We've yet to see the spike in mortgage rate resets, which will increase the already high default rate. This, in turn, will flood an already bloated level of supply. Plus, lending restrictions are tightening and will continue to do so, stifling demand. And what happens when the Fed finally decides to take care of the inflation problem? Interest rates will increase, further dampening the demand for homes.

Today's report from the NAHB looks frighteningly similar to last months index. I see a continuing trend. Homebuilders should look forward to 2009. That's their best bet.