U.S. Homebuilder Sentiment Index Falls to 15-Year Low

Bloomberg reports:

Confidence among U.S. homebuilders plunged to the lowest level in 15 years this month as buyers cancelled orders and inventories of unsold dwellings piled up, a private survey showed.

The National Association of Home Builders/Wells Fargo index of builder confidence fell to 32 from 39 in July, the Washington-based association said today. It was the seventh consecutive monthly decline.

Homebuilders including Toll Brothers Inc. and Hovnanian Enterprises Inc. are slashing profit forecasts as high borrowing costs and home prices discourage many potential buyers. The Federal Reserve last week suspended a two-year cycle of interest-rate increases, saying a cooling housing market had contributed to slower economic growth.

``This is an indication the Fed has every reason to tread cautiously on interest rates,'' said Eric Green, chief market economist at the securities arm of Countrywide Financial Corp. in Calabasas, California. ``The risk is if they press too hard, what remains a decisive and orderly decline in housing could become disruptive.''

Core inflation will be more of a factor than home prices.