Builders Remain Optimistic About Housing Market

Enlarge Elise Amendola/AP

A key reason homebuilders are more optimistic is that they have seen more people express interest in buying a home.

Elise Amendola/AP

A key reason homebuilders are more optimistic is that they have seen more people express interest in buying a home.

Homebuilders' feelings about the current housing market haven't changed from February. But many are growing more optimistic that sales could pick up in the coming months.

The National Association of Home Builders/Wells Fargo said Monday that its builder sentiment index was unchanged this month at 28, the highest level since June 2007. The flat reading followed five straight increases.

Builders expressed more confidence in sales over the next six months. A separate gauge measuring that outlook rose for the sixth straight month, from 34 to 36.

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 that they have seen 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 January to the highest level since May 2010. Mortgage rates have never been lower. And home construction has picked up.

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.

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 hovering near record lows below 4 percent.

Builders have pointed to some regional pockets of strength. New Orleans, Pittsburgh and other smaller areas of Texas, in particular, have reported increased buying.

Source: NPR : National Public Radio