Home builders' confidence up

Posted on July 19, 2011

Confidence among U.S. home builders improved in July from a nine-month low as executives turned less pessimistic on the outlook for sales.

The National Association of Home Builders/Wells Fargo sentiment index climbed to 15 this month, higher than forecast, from 13 in June, data from the Washington-based group showed Monday. The median projection of economists surveyed by Bloomberg News was for a gain to 14.

“It’s still at a very low level,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York, said about the home builders’ measure. “In order to see a brighter future for housing, we need to see a stronger economy.”

Builders are facing a backlog of discounted, distressed properties that remain in the foreclosure pipeline and are hesitant to start new projects. Rising unemployment and depressed home values may keep housing one of the weakest parts of the recovery.

Readings lower than 50 in Monday’s home builder measure mean more respondents said conditions were poor. Projections among the 36 economists surveyed ranged from 12 to 16.

The gauge, first published in January 1985, reached a record low of 8 in January 2009, and averaged 54 in the five years before the recession began in December 2007.

The builders group’s index of sales expectations for the next six months increased to a three-month high of 22 from 15. A gauge of current single-family home sales rose to 15 from 13. The index of buyer traffic held at 12.

“The market continues to bounce along the bottom, with conditions in some locations beginning to improve,” NAHB Chief Economist David Crowe said Monday in a statement. “The stronger rebound in sales expectations for the next six months likewise marks a return to trend.”

The NAHB confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

Builders in three of the four regions were less pessimistic this month. In the South, the gauge rose to 17, the highest since March, from 14 a month earlier. The measure also rose in the West and Midwest.