Are we just spinning our wheels?

The National Association of Home Builders released a statement today that builder confidence is down.

"Home builders remained considerably downbeat as market conditions continued to erode in May, according to the NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI fell a single point to 19, bringing it within one point of the record low 18 set in December 2007 (the series began in January of 1985). "

"With the HMI hovering in the historically low two-point range that's prevailed over the past nine months, the message is very clear: The single-family housing market is still deteriorating and Congress and the Administration must move immediately to enact legislation that will help reverse the trend," said NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. "A temporary home-buyer tax credit is just the incentive that many prospective home buyers need to go forward with a purchase and help kick-start a housing and economic recovery."

The statement went on to say:

"Despite the Federal Reserve's concerted efforts to lower short-term interest rates, free up credit markets and shore up the national economy, the housing market has shown no evidence of improvement thus far. In fact, conditions have continued to deteriorate in recent times," said NAHB Chief Economist David Seiders. "The latest HMI shows that even fewer builders now foresee market conditions improving over the next six months compared with our April survey, and builder ratings of buyer traffic through model homes also have dropped off over the past month on a seasonally adjusted basis. This certainly adds fuel to the argument that targeted policy stimulus, in the form of a temporary tax credit for home buyers, is essential to halt the housing downswing and remove the heavy drag being exerted by housing on overall economic growth."

I don't know...call me crazy, but I really don't see how a $7,500 tax credit is going to do a whole lot. Many buyers are worried about the value of a home going down by double digits. My buyers are concerned by overpaying by 10% which would be a $20,000-$50,000 loss of value in their eyes.

Do I think that $7,500 will bring buyers looking...yes...will it get buyer's buying...I don't think so. The fact is that people still have to be able to afford the mortgage payment. With homes floating to such high prices, they needed to correct and in some areas still correct in order to make the payments affordable. A tax credit doesn't make the house affordable, just more enticing.

So I'm left to wonder why we are spinning our wheels?

Spin: FHA limits raised

Spin: Jumbo loan criteria changed

Spin: Subprime bailout

Spin: Tax credit

Okay...enough...I'm dizzy now.

The bottom line is pretty simple to me...can a buyer afford the monthly payment for a home or not? Our home price to income ratio (historically around 3.0-3.5) is still too high here in Oregon. This means that if people want to own a home, they have to be "house poor." I am seeing more and more people, not agreeing to do that. As long as home prices are not in line with current incomes, they won't be affordable, and people won't buy houses.

Maybe my problem is that I'm too simple when it comes to the market. Maybe if I stare at that spinning wheel long enough, it will make more sense.