Builder confidence erodes

New foreclosures and high unemployment are making builders uneasy in December. Not that they were particularly confident to begin with.

By Kim Peterson Dec 15, 2009 3:32PM
Homebuilder © Paul Burns/Getty ImagesHomebuilders had been feeling better about the economy this fall, but in December they became a cranky bunch again.

An index of builder confidence has fallen to its lowest level since June, according to The National Association of Home Builders. The index fell to 16 in December from 17 the month before.

Anything below 50 means most of those surveyed view conditions as poor, Bloomberg reports. Analysts had expected the index to rise to 18 for December.

What's eroding builder confidence? Many in the real estate industry expect a new pop in foreclosures after the holidays -- and that could continue through the first part of the year.

On top of that, the unemployment rate is expected to average about 10% next year, Bloomberg reports.

That combination of new foreclosures and high unemployment means trouble for homebuilders, even after President Obama extended a tax credit for first-time homebuyers.

But at least one homebuilder is putting on a happy face. "We don't know how fast we're coming back, but we do know we're coming back," said Robert Toll, the chief executive of Toll Brothers (TOL). "There's a pretty good reservoir of pent-up demand."

Well, sure, pent-up demand could be high. Lots of people would love to get into a new house. But demand doesn't translate into new-home purchases, particularly when jobs are at risk and when the foreclosure market continues to expand.

At any rate, builder confidence was lowest in the Midwest, Bloomberg reports. Confidence actually rose for the month in the Northeast and the West, but not enough to buoy the overall confidence level.

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