Singing the Home Builders Blues

For the first time in months, home builders feel less confident about the market for new single-family homes.

The reason? The November 30 expiration of the $8,000 tax credit for first-time home buyers. That break brought many buyers into the market, home builders say, and now that it’s scheduled to go away, things don’t look so good.

Current sales are down, sales expectations for the next six months are down, and the number of people looking at houses is down, according to October’s National Association of Home Builders/Wells Fargo Housing Market Index. The index is based on a survey of home builders across the country.

“This is the first time since November of 2008 that all three component indexes of the HMI have declined,” said NAHB chief economist David Crowe. “Clearly, builders are experiencing the effects of the expiring tax credit on their sales activity, since it would be virtually impossible at this point to complete a new home sale in time to take advantage of that buyer incentive before November 30.”

NAHB and the National Association of Realtors are lobbying Congress to extend the credit for another year and open it up to all home buyers, not just first-timers.

Home builders estimate that would generate nearly 350,000 jobs, $28.2 billion in wages, salaries, and business incomes, and $11.6 billion in additional tax revenue.

“That’s an opportunity we can’t afford to pass up at this difficult time,” said NAHB president Joe Robson, a Tulsa, Oklahoma, home builder.

Congress, however, may not have the stomach to throw another $15 billion or so at the housing market, particularly when the U.S. government ran a record $1.4 trillion deficit in the fiscal year that ended September 30.

Some economists also question the wisdom of extending the tax credit.

“We believe the results would be less than expected,” Wells Fargo economists wrote in a commentary released Monday. “Employment conditions are considerably weaker today than they were when the tax incentives were enacted, and many of the most likely buyers targeted have already taken advantage of the program.”

Plus, stimulus provisions lose their stimulative effect if they’re not temporary, the economists noted.

Congress can’t juice up every sector of the economy—sometimes industries have to stand on their own, or sit down and take a break.