Survey finds confidence at 15-year low.
SARASOTA -- Builder confidence sank to a 15-year low in a national survey by Wells Fargo and the National Association of Home Builders.
The NAHB also indicated the market is likely to remain depressed for the remainder of 2006.
The Housing Market Index for August declined seven points to 32, its lowest level since February 1991 when the measure stood at 27.
Any number above 50 indicates that more builders view sales conditions as good than poor.
August was the seventh consecutive month in which builder confidence, as measured by the index, has fallen.
Some home builders in this region "have not had any sales this year" and are working off unfinished backlogs to survive, said John King, president of the Homebuilders Association of Sarasota County.
While acknowledging that overall confidence is down, King said he is starting to see signs that "things are picking up" and that sales incentives are working.
Lakewood Ranch-based Neal Communities has made sales in recent weeks and its namesake credits "new products with substantially reduced prices."
Pat Neal, who owns enough land in the region to accommodate about 9,000 new houses, might be in a better position than some builders: He has land with a lower cost-basis that he can pass along to buyers without hurting his profits significantly.
King said he is more worried about the state's insurance crisis than the general market weakness.
"No insurance, no mortgage," he said.
The home construction industry had a "long run of overconfidence in which it could build anything and sell it," said Derrick Barwick, senior vice president of Palmetto-based builder de Morgan Communities. Those days "are gone. It's no longer the go-go market."
Barwick figures it will take the better part of a year for inventory to balance with demand, and even then, it will not return to the heady 2004-05 levels.
"There will be slower absorption rates," he said, "but it will get absorbed eventually."
David Seiders, the NAHB's chief economist, said in a statement that builders' perceptions are being influenced by growing inventories and rising cancellations. Other factors include a rising number of buyers postponing their buying decisions, record-high energy costs, and the withdrawal of investors and speculators from the market.
The NAHB has been doing the survey for 21 years. It gauges builder perceptions of sales expectations for the next six months as "good," "fair" or "poor." It also asks them to rate buyer traffic.
Scores for each component are then used to calculate a seasonally adjusted index.
All three components fell in August, with the index registering a 9-point decline to 41 in the South.
"We expect the erosion in market activity to continue through most of this year before stabilizing in 2007," Seiders said, noting that builders' sentiments are often worse than reality.
Incentives to make sales abound, even among Southwest Florida's big players.
Lennar Homes is launching a four-day-long "26 Hour Sale" this weekend featuring reduced prices in 13 neighborhoods in the region. The effort includes the lowest prices offered by the big Miami-based home builder so far this year, said Rob Allegra, president of the Sarasota/Manatee division.
Allegra said the current downturn is a six- to 12-month proposition. If he or his bosses thought it was more severe, Lennar would be "leaning the machine and laying off people, which we're not."
