Home Builder Confidence Climbs Amid Foreclosure Properties
Despite the continued rise in the number of foreclosure properties in most areas nationwide, confidence among home builders jumped in April to its highest level in 6 months, as mortgage rates fall and as foreclosure prevention efforts step up.
According to the Washington-based National Association of Home Builders, its NAHB/Wells Fargo home builder confidence index jumped from a reading of 9 in March to 14 in April, the highest increase since May 2003. A reading of -50 means most home builders see home construction conditions as poor.
After nearly four years of decreasing sales of new homes and existing homes, falling mortgage rates and home prices are starting to entice hesitant people to buy new homes and foreclosure properties.
Even so, inventories of foreclosure properties are still in high levels, indicating the housing stability many are hoping for may still be far away.
It is not surprising that the home builder confidence index rose as some signs of increases in property sales appeared in some areas, according to Tom Porcelli, economist of Castlestone Management Ltd. He said home builders are typically optimistic people.
The confidence index was estimated from the results of a survey asking home builders to describe current home sales as poor, fair or good and to estimate the number of prospective homebuyers. The survey also asks builders to describe their outlook on the home building sector for the next two quarters.
The confidence index rose nationwide, with the highest increases in readings in the Northeast and in the Midwest.
David Crowe, chief NAHB economist, said some factors that favor home buying, such as low mortgage rates, are now prodding consumers to take a look at the market. He hopes these factors are pointing to the approaching end of the housing depression.
As foreclosure properties previously hidden by foreclosure moratoriums begin to be added to existing inventories of foreclosure properties, home builders continue to struggle. Based on a Bloomberg survey, housing starts dropped by 7.4 percent to a yearly rate of 540,000 in March, very near the record low of 477,000 posted in January this year and 76 percent below the peak level of 2.27 million units in January 2006.
Lennar Corp, considered the fourth biggest home builder in the country, said its first quarter loss this year was higher than that of last year due to declining orders. Still, the firm’s CEO Stuart Miller is hopeful, saying that lower mortgage rates have been driving sales of new homes and foreclosure properties in the past weeks.
