Confidence among builders in the new, single-family home market jumped in October, according to the National Association of Home Builders/Wells FargoHousing Market Index(HMI). The index gained four points from September, for an October reading of 18.
Considering that the index would require a reading of more than 50 to indicate that a majority of builders surveyed see conditions as "good" rather than "poor," October’s reading is still low. However, the boost is the largest monthly jump since April 2010, when the home buyer tax credit lent the housing market some false hope.
"Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued," said Bob Nielsen, NAHB’s chairman, in a press statement.
The NAHB’s press release blamed the still-low confidence level on restrictive lending and the rising cost of building materials at a time when home prices are being pushed downward by distressed properties.
What seems to be lifting builders’ spirits the most is hope for the near future. While all three of the HMI’s components saw gains this month, the largest improvement came from sales expectations for the next six months, which jumped seven points to 24. The gauge of current sales conditions rose four points to 18, and prospective buyer traffic rose three points to 14.
Whether or not these feelings of hope are a reliable harbinger of substantive improvements to come remains to be seen, says Patrick Newport, U.S. economist at IHS Global Insight. "Single-family housing permits, the most important housing market indicator, have climbed from a 382,000 annual rate in February to a still-very-depressed 418,000 in August, pointing to some improvement," he wrote in an email to Builder today. "September’s housing starts and permits release on Oct. 19 will make it clearer whether a trend is forming."
Claire Easley is a senior editor atBuilder.
Learn more about markets featured in this article: Greenville, SC.