Homebuilder More Upbeat

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Rich Storey
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Homebuilders a bit more upbeat

Index shows that builders were slightly more optimistic in February compared to January, but near-record low levels suggest home sales will remain sluggish.

NEW YORK (Reuters) -- U.S. homebuilder sentiment climbed in February but held tightly near all-time lows, suggesting sales of new single-family homes would be meager as long as foreclosures flood the market, the National Association of Home Builders said on Tuesday.

The NAHB/Wells Fargo Housing Market Index eked out a one-point gain to 9 from the record low set in January, the group said in a statement. Economists polled by Reuters had predicted the index would stay at 8, the lowest reading since this measure started in January 1985.

Readings below 50 mean more builders view market conditions as poor than favorable. It was the fourth straight month the builder sentiment gauge clung to single digits, and was less than half of the reading of 20 posted a year ago.

"Homebuilders are especially concerned about the continually rising number of foreclosures and short sales, which are flooding the market with excess inventory and undermining overall home values," NAHB chief economist David Crowe said in a statement.

Concerns about this oversupply worsened the outlook for sales in the next six months, even though home buyer shopping picked up and affordability improved.
Builders are counting on new government stimulus to inject life into the worst U.S. housing downturn since the Great Depression.

New home sales are struggling, but "we are certainly hopeful that the newly passed economic stimulus bill, which includes some favorable elements for first-time homebuyers and small businesses, will have a positive impact that will help get housing and the economy back on track," Joe Robson, NAHB chairman and a builder from Tulsa, Oklahoma, said in the statement.

Two key provisions that should stimulate housing are an $8,000 first-time homebuyer tax credit, and extended 2008 high-cost area limits on loans sold to Fannie Mae, Freddie Mac and the Federal Housing Administration, the trade group said.

NAHB said its current sales conditions index rose 1 point to 7 and its gauge of prospective buyer traffic increased 3 points to 11 in February. But its measure of sales expectations for the next six months fell two points to 15, a new record low.

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