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Builder confidence up for fifth consecutive month

Although it has a long way to go until a healthy reading, the builder confidence study reveals that sentiment is up, hitting pre-bust levels.

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Builder confidence continues to rise

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today, builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September, up three points for the month to a level of 40. This gain brings the index to its highest reading since June of 2006.

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work – which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

“Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years,” noted NAHB Chief Economist David Crowe. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”

Builder confidence still has a ways to go

While most news outlets and associations will use this data to show a recovery, we continue to remind our readers that any Index reading under 50 percent means that less builders have confidence in the market than those that do, meaning the market has quite a ways to go before there is any consensus that new home construction will be okay.

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Although more builders are negative than positive, all three HMI components posted gains in September. While the component gauging current sales conditions increased four points to 42, the component gauging sales prospects in the next six months rose eight points to 51 and the component measuring traffic of prospective buyers edged up one point to 31.

Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest and West each registered five-point gains, to 40 and 43, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30.

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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