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Home Builders Still Feel Better, Despite 'Cliff' Concerns

Tuesday, 18 Dec 2012 | 10:00 AM ET
Zigy Kaluzny | Stone | Getty Images

The nation's home builders continue to feel much better about their industry, but the dramatic gains seen through the summer and fall appear to be moderating.

An industry index measuring home builder sentiment in the single-family market rose two points in December, while November's five-point monthly gain was revised lower by one point.

The National Association of Home Builder's/Wells Fargo Housing Market Index now stands at 47; 50 is the line between positive and negative sentiment. The index stood at 21 in December of 2011.

"Builders across the country are reporting some of the best sales conditions they've seen in more than five years, with more serious buyers coming forward and a shrinking number of vacant and foreclosed properties on the market," observed NAHB Chairman Barry Rutenberg in Tuesday's release. "However, one thing that is still holding back potential home sales is the difficulty that many families are encountering in getting qualified for a mortgage due to today's overly stringent lending standards."

Of the index's three components, current sales rose two points to 51, pushing into positive territory for the first time since the housing crash. Sales expectations over the next six months, while remaining in the positive, dropped one point, and buyer traffic rose one point but is still far from positive territory at 36.

Regionally, home builder sentiment saw its biggest jump in the Northeast, up 12 points month-to-month. Sentiment rose two points in the Midwest, but fell two points in the South and three points in the West. Only in the Midwest are the home builders in solid positive territory.

(Read More: McMansions Return: Big Houses Are Coming Back)

"We believe that a properly balanced agreement will breed confidence in the political system and the U.S. economy, will enable the housing market to continue its recovery, and, in turn, will promote broader economic growth" -Letter to Obama and Boehner, Signed by 18 CEOs

December's gains in sentiment are not as dramatic as the jump in November, as some builders are likely concerned about the possibility of going over the so-called "fiscal cliff." Some builders have already reported laying off workers and delaying projects, concerned that much-needed capital for construction will dry up if a deal cannot be reached by the end of the year.

Last week the CEO's of 18 home building companies, who collectively build 30 percent of the nation's new homes, sent a letter to President Barack Obama and House Speaker John Boehner urging them to avoid the fiscal cliff, even if it means raising taxes on the builders:

"We support a comprehensive agreement in Washington to avoid the fiscal cliff that includes revenue increases (including tax rate adjustments) together with meaningful entitlement reforms. We believe that a properly balanced agreement will breed confidence in the political system and the U.S. economy, will enable the housing market to continue its recovery, and, in turn, will promote broader economic growth."

The letter was signed by the CEOs of publicly traded builders including Beazer Homes, Hovananian Enterprises, KBHome, Lennar, MDC, and Meritage.

(Read More: Best US Housing Markets for Buyers and Sellers)

—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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