A National Association of Home Builders quarterly index that measures builder and developer confidence in the condo market dropped 11 points in the final quarter of 2007 compared to the same quarter in the previous year.
The Multifamily Condo Market Index, based on a survey of builders, stood at 18.8 in the fourth quarter on a scale of zero to 100. A score below 50 indicates more negative responses than positive responses.
About two-thirds of builders reported that they lowered condo prices to strengthen sales, with an average price reduction of 11 percent.
When asked about other marketing strategies, about 70 percent of respondents reported that they included optional items at no costs, paid closing costs or fees, or absorbed financial points for buyers as incentives.
A component of the condo confidence index that measures sentiment about current conditions in the condo market did not rise above 25 during any quarter in 2007.
A component that tracks condo builder expectations for the next six months was 29.2 in fourth-quarter 2007, down from 49.1 in fourth-quarter 2006.
"Given that the condo market became so overheated during the peak of the housing boom, it is not surprising that the market now continues to struggle, considering the difficulties in the mortgage sector and the fears about the economy in general," said David Seiders, NAHB chief economist, in a statement. "It is going to take time for the extra inventory to be absorbed."
About 28 percent of survey respondents reported a higher or somewhat higher cancellation rate for sales in the fourth quarter compared to the same quarter in 2006. The average sales cancellation rate was 19 percent in the fourth quarter, and the median cancellation rate was 12 percent.
Seiders said in his latest annual housing forecast that he expects total housing starts to fall 25 percent this year, with single-family starts down 31 percent compared to 2007.
The U.S. Census Bureau reported that sales of new single-family homes fell to the lowest adjusted annual rate in about 13 years in January. And new homes spent a median 6.7 months on the market, which was the lengthiest time on market since May 1992, when the agencies reported a median 7.1 months on market.
In a separate builder confidence report, NAHB announced that the confidence index for the single-family housing market bumped up from 18 in December to 19 in January. Another index that measures builder confidence in the rental apartment market fell to or below 50 for all classes of multifamily housing except for the most affordable apartments.
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