Home Builder Index Falls Further

A: Well, the Home Builder Index did fall BELOW expectations as the number came in at 28, the lowest since it hit 27 in February of 1991. Expectations were for an unchanged reading of 30. The second of my two outcomes seemed to play out as even with this horrible number, the markets really didn't move much as the data was released. With the street's expectations on the national housing market already very low, even this real bad reading isn't enough to have an effect on stocks or bond yields. We'll know more tomorrow when Housing Starts & Builder Permits are released for more of a reaction from the tradable markets.

According to CNN Money:

Sentiment among U.S. home builders slid in June to the lowest level in more than 16 years as tighter lender practices and rising mortgage rates crimped sales, the National Association of Home Builders said Monday.

Economists had predicted the index would be unchanged from May's 30 reading, based on a Reuters survey. Readings below 50 mean more builders view market conditions as poor rather than favorable.

"It's clear that the crisis in the subprime sector has prompted tighter lending standards in much of the mortgage market, and interest rates on prime-quality home mortgages have moved up considerably during the past month along with long-term Treasury rates," said NAHB Chief Economist David Seiders.

Keep in mind that this dataset really doesn't affect the Manhattan real estate market much and is more of a leading indicator of builder sentiment across other markets in the US. Until you see this number start to trend higher, it's safe to assume that the home builders really have very little faith in a national housing recovery anytime soon.