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Builder confidence bucks recent trend, rises in October

Builder confidence on the rise

According to the National Association of Home Builders, builder confidence for single-family new home construction rose four points in October, the largest single month gain since the home buyer tax credit stimulated buyers in April of 2010.

Builders’ confidence in current sales conditions rose, as did confidence in sales expectations for the next six months and prospective buyer traffic, all seeing a significant increase in how positively builders view the market after a year and a half of industry pessimism.

The NAHB notes that “regionally, the West led all other areas of the country with its nine-point gain to 21 – the highest HMI score for that region since August of 2007. The Midwest and South each recorded four-point gains, to 15 and 19, respectively, while the Northeast held unchanged at 15.”

This boost is a good sign, but…

“Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “That said, 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.”

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“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,” said NAHB Chief Economist David Crowe. “However, it’s worth noting that while some builders have shifted their assessment of market conditions from ‘poor’ to ‘fair,’ relatively few have shifted their assessments from ‘fair’ to ‘good.’ One reason is that builders are facing downward pricing pressures from foreclosed homes at the same time that building materials costs are rising, and this is further squeezing already tight margins.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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