Builder Confidence Reaches Strongest Level Since Mid-2006

Builder confidence for the newly-built, single-family home market reached its highest level in October since June of 2006, according to the National Association of Home Builders/Wells Fargo Housing Market Index, but constricted credit markets are still limiting the numbers of qualified new homebuyers.

The increase marks the sixth consecutive month of growth, nudging the index up one point to 41.

Although demand for new homes is rising, according to NAHB Chairman Barry Rutenberg, and overall confidence is “much higher” than it was at the same time last year, the current “overly tight” credit conditions are limiting the amount of new construction and new purchases.

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Considering that the 100-point index is only at 41, there’s still a long way to go, said NAHB Chief Economist David Crowe.

“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” Crowe said. “These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor.”

Three of the four regions saw improved builder confidence in October. The Housing Market Index gained two points in the Midwest and West to 42 and 44, respectively, looking at three-month moving averages. The South gained three points on the index, reaching 29, but the Northeast’s index remained the same at 29.

Written by Alyssa Gerace

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