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Home Builder Confidence Rises For First Time in Months

Home builder confidence for newly built, single-family homes rose three points to 16 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for October.

AP

This was the first improvement registered by the HMI in five months, and returns the index to a level last seen in June of this year, according to the survey.

Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006.

All three of the HMI’s component indexes registered gains in October.

The index gauging current sales conditions rose three points to 16, while the index gauging sales expectations in the next six months rose five points to 23 and the index gauging traffic of prospective buyers rose two points to 11.

Builder confidence also improved across every region in October. The South and West each posted four-point gains, to 18 and 12, respectively, while the Northeast and Midwest each posted single-point gains, to 17 and 13, respectively.

High unemployment, slow job growth, and tight credit have kept people from buying homes. The housing market suffered its worst summer in more than 10 years, despite the lowest mortgage rates in five decades.

This fall's home sales may improve, but not by much. A huge backlog of foreclosed properties is dominating the market and providing competition for builders.

Many of the foreclosures could be challenged in court because of revelations that banks evicted people without reading the necessary paperwork. The foreclosure-document scandal could make consumers skeptical about purchasing foreclosed homes if many buyers fear that they could be sued. As a result, prices for foreclosed properties might drop even further.

Weak sales mean fewer jobs in the construction industry, which normally helps power economic recoveries. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the builders' trade group.

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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.