Builders turned more pessimistic in July than forecast, a sign the expiration of a government tax credit will depress home construction.
The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009, from 16 in June, data from the trade group showed Monday. Readings lower than 50 mean more respondents said conditions were poor.
The retreat in sales — following the April 30 expiration of a deadline to sign purchase agreements and qualify for a tax credit worth as much as $8,000 — is lasting longer than projected, the report said.
"The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one," said David Sloan, a senior economist at 4Cast Ltd. in New York, who correctly forecast the decline. "This will weigh on growth in the third quarter and well into the fourth quarter as well."
The index was forecast to fall to 16 from a previously reported 17 in June, according to the median of 48 projections. The gauge averaged 15 last year.
The builder group's index of current single-family home sales fell to 15 from 17.
The gauge of buyer traffic dropped to 10 from 13 the prior month.
A measure of sales expectations for the next six months fell to 21, the lowest level since March 2009, from 22.