Builder Confidence In The Condo Market Continues To Decline

Posted by RealEstateRama

August 8, 2008

August 8, 2008 - (RealEstateRama) — Builder confidence in the market for condominiums continued to fall in the second quarter of 2008, according to the Multifamily Condo Market Index (MCMI), released today by the National Association of Home Builders (NAHB). The latest decline pushed two of the three components of the MCMI to their lowest levels since NAHB created the index in 2002.

“Like the market for single-family homes, the housing slump and the recent turmoil in the financial markets are also distressing the condo market,” said NAHB Chief Economist David Seiders. “The hope now is that the housing stimulus bill signed into law last week by the President will support a much-needed turnaround in all sectors of the housing market, including condos.”

The milestone legislation is expected to bring a substantial boost to the housing industry in the form of a temporary tax credit for first-time home and condo buyers, as well as much-needed measures that will improve mortgage liquidity, foster refinancing of troubled loans and expand the supply of affordable rental housing. The newly enacted legislation will offer first-time home and condo buyers a tax credit of up to $7,500 for purchases made from April 9, 2008 to July 1, 2009.

The MCMI is derived from a quarterly survey of multifamily builders and developers, and the index is rated on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

Condo developers reported that traffic of prospective condo buyers declined in the second quarter, pushing the MCMI component that tracks demand down nearly nine points to 28.1 from 36.8 in the second quarter of 2007.

On the component of the index tracking supply, the MCMI fell to a record low of 10, down from 18 at the same time a year ago. The index tracking builder expectations for supply over the next six months stood at 21.0, down from 26.3 at the same time a year ago.

Editor’s Note: NAHB created the MMI, a quarterly nationwide survey of multifamily builders and property owners who are asked a series of questions about current market conditions as well as their expectations for the next six months, tracking builder confidence in both the for-sale condo market and the rental apartment market. To more accurately gauge both segments of the market, NAHB separated the indexes into two versions in 2006: The Multifamily Rental Market Index (MRMI) tracks multifamily rental conditions while the Multifamily Condo Market Index (MCMI) tracks market conditions for condos.

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