Homebuilder Confidence Slips As Government Freebies Go Away

In the latest evidence that the economic recovery is losing steam, the confidence of homebuilders has slipped to the lowest level in more than a year following the expiration of the federal homebuyer tax incentives.

The National Association of Home Builders reported Monday that its seasonally adjusted housing market index dropped to 14 in July, marking the lowest level since March 2009 when the recession was in full force. The agency also revised June’s index down to 16.

A reading below 50 indicates that the sentiment of homebuilders is negative, and the index has not broken that mark since April 2006. Homebuilders are reporting a strong drop in demand after the expiration of the up to $8,000 tax credits in April.

New home sales fell 33 percent in May to the slowest pace in the 47 years that sales records have been kept, while the number of buyers that signed purchase contracts to buy previously owned homes dropped 30 percent.

"The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy," said David Crowe, the agency’s top economist.

Crowe sees new home sale increasing a tepid 10 percent this year, following the grip the recession had on the housing market a year ago.

Impacted companies trading in midday market movement Monday include:

Beazer Homes USA Inc. (NYSE: BZH), down 4.59 percent to $3.53
D.R. Horton Inc. (NYSE: DHI) down 1.58 percent to $9.94
Hovnanian Enterprises Inc. (NYSE: HOV) down 6.70 percent to $3.76
KB Home (NYSE: KBH) down 2.28 percent to $10.28
Lennar Corp. (NYSE: LEN) down 1.45 percent to $13.81
eGroup, Inc. (PHM) up 0.37 percent to $8.08.