Builder Confidence at a Six-Year High

Homebuilder confidence continues to improve, especially in the prospective sales category, which rose six points in September to a score of 51, indicating more positive than negative sentiment in a single category for the first time in most of a decade.

Confidence in the housing market reached a six-year high among builders in September.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released Sept. 18, rose for a fifth consecutive month to a composite score of 40, the highest reading since June 2006.

The HMI surveys builders on three market components, all of which posted gains. The most remarkable improvement was in the component gauging sales prospects for the next six months, which rose eight points to 51. A score above 50 means more builders have a positive perception than a negative one, making this component the first truly "positive' reading the HMI has posted since early 2006.

The component gauging current sales conditions increased four points to 42, and the component measuring traffic of prospective buyers added one point to reach 31. The composite score of 40 added three points to the August reading, reflecting deep, lingering concern despite recent improvements.

"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," NAHB chief economist David Crowe said in a statement. "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."

Homebuilder and NAHB chairman Barry Rutenberg also pointed to continuing financial uncertainty as an ongoing obstacle to more aggressive growth. "Unnecessarily tight credit conditions are preventing many builders from putting crews back to work, which would create needed jobs, and [are] discouraging consumers from pursuing a new-home purchase,"???(R)???AE'?N????e'?N,A+Rutenberg said.