Confidence Amongst US Homebuilders Increases from a Nine-Month Low

19 July 2011

Confidence amongst US home builders has increased in July from a nine-month low due to a less pessimistic outlook for sales. The National Association of Home Builders/Wells Fargo sentiment index increased from 13 in June to 15 this month, which is higher than was previously forecast.


Although the index is still at a very low level it is at least a step in the right direction, but economists are still saying that in order for the housing market to recover the economy must become stronger. Many builders are facing competition from a backlog of foreclosures and distressed properties, and this is making them hesitant about starting new developments. It's likely that home values will remain depressed, and there are worries about rising unemployment levels which look certain to keep the housing recovery at bay.


Index readings of less than 50 mean that most respondents believe conditions are poor, and before the recession began in December 2007, the average reading was 54. It reached a new record low of eight in January 2009. In spite of this however, the builders group's index of sales expectations for the second half of the year increased to a three-month high to 22 from 15.


According to NAHB chief economist, David Crowe, the market is at the bottom, and conditions in certain locations are showing improvements. Builders are becoming less pessimistic about the current outlook in three out of four regions.


Sales of existing homes increased by 2.9% in June, and although sales levels are still depressed they have been gaining on new-home sales due to the increased demand for lower-priced properties. Sales of existing homes are now at an annual rate of 4.9 5 million, up from a 13 year low of 4.9 1 million in 2010.

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