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Homebuilders More Confident Despite Economic Outlook

Homebuilders grew more confident this month than at any time in the past year, a measure of strength in the housing market that nonetheless trails figures seen before the financial crisis.

A survey released Tuesday by the National Association of Home Builders (NAHB) showed homebuilder confidence cresting at 18 points, four points up from a score of 14 indexed by the trade group last month. Points below 50 signal a negative outlook about the market.

The NAHB/Wells Fargo Housing Market Index polled builders about their feelings concerning single-family home sales over the next half year. The survey asked participants to rate the homebuilding market with phrases such as “good,” “fair,” and “poor.”

Commenting on the leap ahead in confidence in a statement, NAHB chairman Bob Nielsen chalked up gains in builder confidence over October to “modest improvements in buyer interest… where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued.

“That said,” he added, “confidence remains quite low as builders continue to confront overly restrictive lending policies that are discouraging prospective buyers, problems with new-home appraisals and widespread uncertainty regarding federal support for homeownership.”

The uptick in homebuilder confidence represents the first since the

expiration of the federal homebuyer tax credit in April last year.

The NAHB found considerable push in three areas indexed by the survey, with a hopeful nudge in sales expectations over the next six months to 24 points, up seven points from 17 points in September.

The survey recorded homebuilder confidence in prospective buyer traffic inching forward to 14, up three points from 11 points last month.

Of all the regions, confidence in the West surged forward to 21 points, up seven points and the biggest increase for the area in four years.

Homebuilder sentiment in the Northeast stayed unchanging at 15 points, while the Midwest and South each saw four-point pickups, driving ahead to 15 and 19, respectively.

“This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country as extremely favorable interest rates and prices catch consumers’ attention,” David Crowe, chief economist with NAHB, added in the statement.

He said that “relatively few” homebuilders upgraded their assessments from “fair” to “good” over the course of the last two months in spite of the overall change from “poor” to “fair” in the same time frame.

Foreclosed homes continue to weigh against home sales and construction by creating downward pricing pressures, “further squeezing already tight margins,” he said.

The jump in homebuilder confidence arrives on the heels of grim forecasts for the housing market and broader economy.

On Monday Fannie Mae released the 2011 October Economic Outlook, revising expectations for GDP by predicting it would hover below 2 percent for the remainder of the year and 2012.

The GSE partly attributed a 50-percent chance for a recession by the end of 2012 to a sluggish housing market, which Richard Koss, director of economics with Fannie, framed as one beset by still-low home prices and diminishing consumer confidence.


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