WASHINGTON -- U.S. homebuilders are gradually growing more optimistic about the depressed housing market and believe homes sales could pick up sharply when the spring buying season begins.
The National Association of Home Builders/Wells Fargo said Wednesday that its builder sentiment index rose for a fifth straight month in February to 29, up from 25 in January. The index has climbed 15 points since September and is now at its highest level since May 2007.
Builders have generally become more hopeful during that stretch about current sales, sales six months out and foot traffic, the report shows.
Even with the brighter outlook, the industry has a long way to go. 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.
A key reason homebuilders are more optimistic is they are seeing more people express interest in buying a home. And rising interest has occurred alongside other improvements that suggest the troubled housing market could pick up after four weak years.
Sales of previously occupied homes rose in December for a third straight month. Mortgage rates have never been lower. And home construction picked up in the final quarter of last year.
Still, home prices continue to fall, and builders keep slashing their prices to stay competitive. Last year was the worst for new-home sales on records dating back to 1963.
Ian Shepherdson, chief U.S. economist for High Frequency Economics, said the index is now consistent with new-home sales rising to more than 450,000 annually. While that's below the 700,000 considered healthy, it would be an improvement from the recent trend of just over 300,000.
"The story here is that pent-up demand is being freed by much easier mortgage conditions, low rates and rising employment," Shepherdson said. "It's real."
But some economists have questioned the foundation for the growing optimism. Pierre Ellis, an analyst at Decision Economics, notes that new-home sales are up just 1.7 percent from September through December, the latest government data on sales.
"Recorded sales of new homes have hardly budged since September," Ellis said. He said the credibility of the builders' survey is "shrinking month by month."
New homes make up a small portion of housing sales. But they have an outsize impact on the economy. The builder trade group says each new home built creates an average of three jobs for a year and generates about $90,000 in taxes.
Builders are struggling to compete with foreclosures, which have forced down prices of previously occupied homes. And many people are finding it hard to qualify for loans or meet higher required down payments.
Low appraisals are scuttling some deals after contracts have been signed. As a result, some people who want to buy a new house are holding off because they can't sell their home.
Those in a position to buy are benefiting from lower prices and mortgage rates. The average rate on the 30-year fixed mortgage is at record lows below 4 percent. Yet those factors have done little to boost home sales.
Builders have pointed to some regional pockets of strength. New Orleans, Pittsburgh and other smaller areas of Texas, in particular, have reported increased buying.
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Rebounding Real Estate Markets: Top 10 Turnaround Towns
Homebuilder Optimism Grows as Spring Nears
Median List Price Appreciation: 17.79 percent
Median Age of Inventory: -16.18 percent
Inventory Change: -29.25 percent
Home Price: $2.999 million
Sq. Ft.: 5,123
After slipping out of Realtor.com's top 10 rankings for the third quarter of last year, Punta Gorda has reclaimed status as a town in the vanguard of real estate recovery. Home prices are reportedly just beginning to trend upward. But they still have a long way to go: home prices in town are 56.2 percent lower than they were in 2006, at the peak of the housing boom.
Median List Price Appreciation: 9.09 percent
Median Age of Inventory: -28.89 percent
Inventory Change: -35.28 percent
At 11 percent, the Lakeland-Winter area has the highest rate of unemployment on Realtor.com's top 10. But the real estate market seems to be another story. Realtor.com says that the area was the fourth-most-searched spot by users of their listing service. Distressed home sales have fallen significantly from last year as well.
Home Price: $1.3 million
Sq. Ft.: 7,813
The local market may be on the road to recovery, but distressed home sales still are hindering the market. This French mansion is selling by way of short sale.
Median List Price Appreciation: 7.84 percent
Median Age of Inventory: -35.71 percent
Inventory Change: -41.63 percent
Home Price: $5 million
Sq. Ft.: 8,700
Sale prices in this sultry town have risen 18 percent year-over-year, as of November, quite an encouraging sign for the local market. Meanwhile, unemployment is shrinking. The rate fell to 9.4 percent in November.
This Mediterranean may have just seen its price slashed, but with a $5 million ask, it'll still cost you a pretty penny.
Median List Price Appreciation: 13.38 percent
Median Age of Inventory: -13.64 percent
Inventory Change: -35.94 percent
Home Price: $19.9 million
Sq. Ft.: 8,226
Naples finds its way onto Realtor.com's list for the first time this quarter, thanks, in part, to its housing market's 13.64 percent decline in median age inventory and 13.38 increase in median list price.
Naples offers its fair share of uber-luxury homes. This waterfront mansion, at nearly $20 million, costs $2,419 per square foot.
Pictured here is a dining room of the home (we're guessing there's probably another one considering the place is 8,000 square feet). The elaborately decorated room features what appears to be a flying saucer. Maybe it can beam up the filet mignon.
Median List Price Appreciation: 13.77 percent
Median Age of Inventory: -23.42 percent
Inventory Change: -39.66 percent
Home Price: $1.5 million
Sq. Ft.: 4,875
A drop in foreclosures in this city shrank its year-over-year for-sale inventory by a whopping 40 percent as of last year's fourth quarter. The city also enjoys the benefit of an unemployment rate that is lower than the national average.
Median List Price Appreciation: 10.78 percent
Median Age of Inventory: -26.57 percent
Inventory Change: -31.01 percent
Home Price: $12.5 million
Sq. Ft.: 7,194
In Sarasota, home sales jumped 17 percent last year while median list prices defied the national downward price decline by ticking up 2 percent. Realtor.com goes so far as to suggest that the market may have graduated to "seller's market" status, unthinkable in most housing markets across the country.
Thrust out into the Gulf of Mexico, this jaw-dropping manse practically commands its own square-shaped peninsula. But apparently personal peninsulas don't come cheap in Sarasota: This property is listed to the tune of $12.5 million.
Pictured here is the home's covered dock that parks at least two boats. Inside the home you'll find an exercise room, library and attached "oversized" verandas. Other outdoor amenities include an expansive pool and shuffleboard courts.
Median List Price Appreciation: 31.27 percent
Median Age of Inventory: -17.60 percent
Inventory Change: -35.31 percent
Price: $8.7 million
Sq. Ft.: 13,723
The Fort Myers-Cape Coral area continues to chug along the path to recovery with its median sales price zooming upward by 20 percent last year. But there's more to brag about: The area experienced the highest year-over-year increase in median list price for the fourth quarter -- 31.27 percent.
Median List Price Appreciation: 8.22 percent
Median Age of Inventory: -36.52 percent
Inventory Change: -44.02 percent
Home Price: $3.99 million
Sq. Ft.: 8,676
Year-over-year inventory plummeted by 44 percent in Orlando in the fourth quarter of last year, while list prices rose 8.22 percent. Both movements point toward a market that is truly beginning to right itself.
Fit for the big-swinging, cigar-smoking mogul, this luxury home, which recently had its price cut, puts you close to the links.
Median List Price Appreciation: 15.38 percent
Median Age of Inventory: -27.47 percent
Inventory Change: -48.10 percent
Home Price: $5.995 million
Sq. Ft.: 11,039
An area that had its housing market severely bruised by the foreclosure crisis, the Phoenix-Mesa area is mounting a recovery in a big way. While residents continue to file for foreclosure at a rate above the national average, the glut of cheap homes idling on the market has lured bargain-hunters. The area's relatively low unemployment rate of 7.7 percent also will work in its housing market's favor.
Median List Price Appreciation: 28.57 percent
Median Age of Inventory: -30.89 percent
Inventory Change: -51.44 percent
Home Price: $6 million
Sq. Ft.: 3,870
Buy in the city where the heat is on -- all night on the beach 'cause the housing slump's gone! Welcome to Miami (beinvenido a Miami)!
Miami leads the pack of cities building toward a recovery. Existing home sales in the Miami area leaped 51 percent in the third quarter compared to a year ago. Meanwhile, inventory shrank by half. Realtor.com suggests that much of the improvement is attributable to strong foreign activity in the market.
This luxury apartment may soon be the trophy home of some foreign magnate. According to Realtor.com, in May of last year, international buyers purchased about 60 percent of existing houses and condos and 90 percent of the newly built homes in Miami.