Home Builder Confidence Rises, Tempered by Doubts

home builder confidenceWASHINGTON -- The outlook among U.S. homebuilders became a bit rosier in June, but the future prospects for home construction are anything but promising.

An index of builders' outlook for their industry in June rose two points to 15, the National Association of Home Builders said on Monday. Any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached 50 since April 2006, the peak of the housing boom.

In May, builder sentiment hit its lowest level in nine months. It's still just seven points above the lowest reading on record, in January 2009.

Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales, when lenders allow borrowers to sell homes for less than what is owed on their mortgages. Lower-than-expected home appraisals are scuttling deals. And loans are harder to come by, with requirements that borrowers put 20 percent of a home's cost as down payment.
"Basically, the market continues to bounce along the bottom, with conditions in some locations beginning to improve," said David Crowe, the trade group's chief economist.

Still, an index that gauges sales expectations over the next six months rose sharply, by seven points, returning to the level it reached in April. That's despite weak foot traffic by potential buyers, which held steady between May and June.

The builders' monthly index is calculated from a survey that characterizes sentiments about current and future sales as "good," ''fair" or "poor."

Last year, the number of people who bought new homes hit its lowest level on records dating back nearly a half-century. This year is shaping up to be just as bad.

New-home sales fell in May to a seasonally adjusted annual rate of 319,000 homes, according to the Commerce Department. That's well below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.

Renting has become a preferred option for many Americans who lost their jobs in the recession and who were forced to leave their rapidly depreciating homes.

Fewer homes mean fewer jobs. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders' trade group.

The outlook among builders is uneven across the country. In the South and West, the index rose three points. In the Midwest, it rose one point. In the Northeast, it fell two points, reaching its lowest point in seven months.

Copyright 2011 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

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