Tight Credit Eases Growing Home-Builder Confidence

Tight credit conditions is restraining further growth in the market for new homes, builders say.
However, serious buyer traffic is much higher than a year ago as the confidence among builders of single-family homes edged slightly higher for a sixth consecutive month in October, according to the National Association of Home Builders/Wells Fargo index.
The latest one-point gain brings the housing market index to 41, its strongest level since June of 2006. A reading above 50 signifies that more builders see sales conditions as good, rather than poor.
“Many builders are reporting increases in the number of serious buyers visiting their sales offices, and the overall confidence measure is much higher than it was at this time last year,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed.”
The speed of the housing recovery is being slowed by tight credit, difficult appraisals, and more recently, the limited inventory of buildable lots in certain markets, explained NAHB Chief Economist David Crowe.
The housing market index is derived from a monthly survey that NAHB has been conducting for the past 25 years.
Following substantial increases in the previous month, the HMI components measuring current sales conditions and sales prospects for the next six months each remained unchanged in October at 42 and 51, respectively.
The component measuring traffic of prospective buyers increased 5 points to 35, its highest level since April of 2006.
Builder confidence continued to improve in three out of four regions in October.
On a three-month moving averages, the HMI gained two points in the Midwest and West to 42 and 44, respectively, and three points in the South, to 39.
A three-month moving average for the Northeast’s HMI held unchanged at 29.

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