Homebuilder sentiment index falls in October

updated 2:12 p.m. ET Oct. 19, 2009

LOS ANGELES - Homebuilders are growing less optimistic about their fortunes as a temporary tax credit for first-time homebuyers that boosted home sales this year nears its end.

The National Association of Home Builders said Monday this month's housing market index, which tracks industry confidence, slipped by one point to 18, the first dip since June when the reading fell to 15.

Builders also are feeling less positive about the likelihood of sales between now and the next six months and said home-shopper foot traffic has softened since September.

The dimmed outlook comes as the federal tax credit that covers 10 percent of a home price up to $8,000 for first-time buyers is set to expire. To qualify, homebuyers must complete their transactions by Nov. 30.

"It would be virtually impossible at this point to complete a new home sale in time to take advantage of that buyer incentive," said David Crowe, the NAHB's chief economist.

The builders' trade association is lobbying the Obama administration to support a 12-month extension. "That would amount to a very effective stimulus to housing demand and a needed boost to the overall economy," Crowe said.

Despite job losses and other impacts from the recession, new home sales have climbed five months in a row. Several major homebuilders have posted better than expected financial results since the spring.

Homebuilders' stocks slipped Monday afternoon following the release of the report. Shares of Hovnanian Enterprises Inc., led the sector drop, with shares falling 10 cents, or about 2 percent, to $4.04.

The reading for current sales conditions slipped one point to 17. Traffic by prospective buyers fell three points to 14. The sales expectations index over the next six months fell two points to 27.

The latest NAHB index reflects a survey of 493 residential developers nationwide. Index readings below 50 indicate negative sentiment about the market. The last time it was above 50 was in April 2006.

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