Confidence Up For Homebuilders, Down For Small Business

Homebuilders continue to believe in the improving fortunes of the housing market, as builder confidence in August hit a five-year high.

Homebuilders' confidence in the growth of the housing market continues to increase, but small business owners are less excited about their prospects this year.

Builder confidence in the market for new single-family homes climbed two points in August to the highest level in more than five years. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose to a seasonally adjusted reading of 37, the highest level since February 2007. (The reading has not had a score of 50, indicating ''good'' conditions, since April 2006.) The current sales conditions component gained 3 points to reach 39, and the question regarding prospective buyer traffic added 3 points for a score of 31. The component measuring sales expectations in the next six months rose a point to 44.

August's HMI marks the fourth consecutive month of increases, which is especially remarkable after the six-point jump from June to July, the largest month-to-month increase in a decade.

''This fourth consecutive increase in builder confidence provides further evidence of the gradual strengthening that's occurring in many housing markets and providing a needed boost to local economies,'' said NAHB chief economist David Crowe. ''However, we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes.''

Outside of the housing market, small-business owners were less confident about economic conditions and their future sales in July, according to an industry index released Tuesday.

The National Federation of Independent Business (NFIB) said its optimism index ticked down to 91.2, a drop of 0.2 points from June and more than three points below February's high for the year.

Bill Dunkelberg, NFIB's chief economist, pointed to Washington gridlock and the tax increases and automatic spending cuts scheduled for the the end of the year as the root cause of the decline. The index has averaged around 90 since the recession ended three years ago ?EUR??,,????'??? the worst for a recovery period since the NFIB survey began almost four decades ago.