Homebuilder Index Rises: Pessimism Still High

Washington, DC, Feb. 17, 2009--Homebuilders' confidence level edged up this month, but the industry remains pessimistic that new home sales will improve over the next six months, according to the National Association of Home Builders/Wells Fargo housing market index.

The index rose one point to nine in February, after dropping to an all-time low of eight in January.

The report reflects a survey of 421 residential developers nationwide. Index readings lower than 50 indicate negative sentiment about the market. The index has been below 10 since November, reflecting tougher market conditions and a worsening U.S. economy.

But some builders reported an uptick in traffic in recent weeks. Lower mortgage rates and aggressive incentives have made homes more affordable. Buyers also will get a financial boost from the mammoth economic stimulus package signed Tuesday.

First-time homebuyers will get an $8,000 tax credit. At the same time, Congress extended higher Fannie Mae and Freddie Mac loan limits in high-cost metro areas through the end of the year.

Builders surveyed said current markets conditions improved slightly from January, while the index for foot traffic by prospective buyers jumped three points to 11.

Still, builders' outlook for sales over the next six months slipped two points to 15, an all-time low.

David Crowe, chief economist for NAHB, said homebuilders remain particularly concerned about the glut of unsold homes on the market, which is driving down prices.

"This is one reason that homebuilder expectations for the next six months declined in the February (index) even though traffic of prospective buyers has improved somewhat and present sales conditions were basically unchanged," Crowe said in a statement.