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Why builder confidence levels in real estate market are still low

For builders of single family homes, confidence levels in the real estate market in December remain unchanged from November according to the National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index (HMI) report release today. The HMI analyzes confidence in current sales conditions and sales expectations in the next six months (both of which remain unchanged) as well as confidence in traffic of prospects which fell slightly in December, likely in anticipating a slow holiday shopping season.

The anomaly in this month’s report is seen when looking at regional numbers as the HMI fell a bit in the West, Midwest and South yet grew substantially in the Northeast.

“While the HMI is adjusted for seasonal factors, the typical cold-weather slowdown in sales activity is being accentuated by ongoing weakness in the job market, the rising number of foreclosures and short-sales, and very challenging credit conditions for both builders and buyers,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich.

“The steady but low level of the HMI reflects the fact that builders and consumers have yet to see consistent signs that the economy is improving,” noted NAHB Chief Economist David Crowe. “The good news is that the index and its subcomponents remain above recent lows from the early fall. NAHB expects an improving job market this spring will help prospective buyers feel more confident and propel more sales activity in 2011. However, the continued problems that builders are facing in obtaining construction credit and accurate appraisal values could significantly slow the onset of a housing recovery.”

At AG, we remain skeptical of a job recovery in early 2011 and believe that builders likely share our skepticism as well as frustration with nearly impossible funding, both of which are keeping confidence levels low.

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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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