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Home builders have grown less optimistic about the real estate market following the expiration of Uncle Sam's homebuyer tax credit.
The index reflects home builders' perceptions of current sales, future sales, and buyer traffic. "The main driver of the decline was the assessments of current home sales, which dropped 6 points," economists at
Like other housing market indicators, this index had been expected to decline from last month's levels, which were juiced by a federal tax credit. Still, June's reading was worse than economists expected. "The latest housing market figures remind me of what happens when an athlete stops taking steroids," Mike Larson of
In an attempt to jumpstart the staggering housing market, President Obama enacted a tax credit worth up to $8,000 for qualified first-time home buyers in early 2009. Last November, the program's deadline was extended to
The tax credit -- along with lower home prices and cheap mortgage rates -- has helped generate demand for real estate in recent months. New home sales, for example, increased 15 percent in April from March, as buyers scrambled to get their contracts signed before the deadline. But because the tax credit worked to pull sales into earlier months, home-buying activity has fallen sharply since its expiration. Home-purchase mortgage application volume has dropped by more than a third over the four weeks ending
"The home buyer tax credit did its job in stoking spring sales and we expected a temporary pull back in the builders' outlook after the credit expired at the end of April," NAHB Chairman Bob Jones said in a statement accompanying the release. "However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels."
Of course, not all of the incentives to buy a home are gone. Homes in many markets remain much more affordable than they were during the real estate boom. Meanwhile, 30-year fixed mortgage rates fell to 4.72 percent for the week ending
"We're lacking a catalyst for a robust recovery, especially when you consider the lackluster state of the U.S. labor market," Larson said. "So don't look for the housing or construction industries to hit the ball out of the park any time soon."