Builders turned more pessimistic in June than expected, signaling housing demand may be slowing even more than anticipated after a government tax credit expired.
The National Association of Home Builders/Wells Fargo confidence index dropped to 17, from 22 in May, lower than all estimates of economists surveyed by Bloomberg and the biggest decrease since November 2008, according to data the trade group released Tuesday. Readings lower than 50 mean more respondents said conditions were poor.
The figures, combined with a collapse in mortgage applications, add to evidence home sales and construction may slump after the deadline to sign contracts and receive a tax break worth as much $8,000 passed in April. The future of the industry will now depend on the strength of employment in coming months.
The incentive "brought forward a lot of attention that otherwise would have happened later in the year," said James Knightley, an economist at ING Financial Markets in London. "Hopefully it will be just a two- to three-month pause. If consumer confidence continues to rise, if household incomes continue to rise, then we could see a recovery perhaps in the fourth quarter of the year."
The index was forecast to fall to 21 this month, according to the median of 49 projections in the survey. Economists' estimates ranged from 18 to 24. The gauge, first published in January 1985, averaged 15 last year. Last month's reading was the highest since August 2007.