Builder Confidence Strongest Since ‘06

By Kara Johnson,

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Homebuilders are feeling more confident about the state of their industry than they have in over six years, according to new survey data from their trade organization.

The National Association of Homebuilders reported today that their index of builder confidence, reflecting the market for construction of single-family homes, rose to a reading of 40 in September. That's the highest value reported since June 2006 and a three-point gain over last month.

It's the fifth consecutive monthly increase for the index, which is based on a 100-point scale. A reading of 50 means that builders are evenly divided as to whether conditions are good or poor.

"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 than they have in more than five years," said David Crowe, NAHB chief economist. At the same time, Crowe expressed concerns that rising costs for building materials and a lack of building lots in certain markets could impede a recovery in housing.

Home construction trending upward

Construction figures show why builders are feeling more optimistic. According to recent data from the Census Bureau, new single-family home construction was up 17 percent in July compared to one year earlier, while building permits issued for single-family homes were up 23 percent over the same period.

The builder's index has shown dramatic improvement over the past year, rising from a dismal 14 in September 2011. Since the housing crash in late 2007, the index had previously remained almost exclusively in the teens and high single digits.

On a regional basis, builders were most optimistic in the West and Midwest, with three-month averages of 43 and 40 in their regional scores, respectively, each of them a five-point gain from last month. The three-month average for the South showed a four-point gain to 36, while the Northeast had a two-point gain to 30.

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This article appears in: Personal Finance Real Estate
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