Thursday, December 20, 2012

NAHB Builder Index Rises to Year High

The National Association of Home Builders/Wells Fargo Housing Market Index rose 2 points in December, making it the eighth consecutive month of gains and the highest index reading since April 2006.

The overall index, which gauges current sales expectations, future sales expectations, and buyer traffic, now sits at a level of 47. Although readings below 50 generally indicate more pessimistic attitudes among builders about the newly built, single-family market, NAHB Chief Economist David Crowe says the underlying sub-indices have consistently increased in recent months, showing that sentiment is improving.

"Current sales expectations and future expectations have broken 50 and flipped over into more optimism," Crowe says. "This is the fourth consecutive month [those sub-indices have been above 50], so that's a good, solid foundation."

Much of strength seen in builder confidence in recent months has been buoyed by the rising tide of the overall housing market, Crowe says, and the increased number of serious buyers more apt to "pull the trigger" when it comes to buying a home.

Low mortgage rates and rising home prices have also played a role in giving buyers more confidence to take the home ownership plunge. As home prices have ticked up, buyers have become less skittish about potentially buying property that could lose value immediately. Higher prices also motivate buyers to jump on a good deal quickly before prices rise further.

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