Homebuilder Confidence Highest in Five Years, Points to Slow Recovery

Home builder confidence rose to its highest level in five years this month, seeing the highest single-month gain in close to a decade, according to the National Association of Home Builders, which tracks confidence on an indexed basis. 

Confidence in the market for new single-family homes rose six points to 35 on the NAHB/Wells Fargo Housing Market Index for the month of July. It is the largest one-month gain in more than nine years and represents the highest level of confidence since March 2007. The increase is further evidence that the housing market has seen its bottom, NAHB representatives said. 

“Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved,” said Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla. “This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable.”

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The housing recovery is still in a fragile state, according to NAHB, but the indicators are positive and improvement will continue as the lending environment loosens. 

“Combined with the upward movement we’ve seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession,” noted NAHB Chief Economist David Crowe. “This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery – namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved.”

Written by Elizabeth Ecker

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  • While the reaction is positive, it is still simply a response to a survey question.  The seasonal building season is all but gone.  The initial proof will be in the filing of building permits and any jump in home construction industry employment.  Don’t hold your breath!!  Any real indicators will not be seen until early spring except perhaps for major acquisitions of major acreage of land for construction.

    It is the last quotation above which would provides the real insight into what will result in a much better new home market environment — looser lending requirements, much better quality in appraisals, and the biggest of all, modification of mortgages on and absorption of the distressed properties in the shadow inventory.  Until the shadow inventory is dealt with, thinking about a substantial increase in new construction of single family residences is like the start of the title of a song by Mama Cass:  “Dream a little dream of…” what could be.

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