Homebuilder Sentiment Index Rises – well, what does that mean? (It is still well below 50)

Two articles out today about the most recent Homebuilder Sentiment Index, one from Reuters, the other from CNBC.

Why is it not surprising (and, yes, I find it very amusing) that the “economists polled” estimated that the October Index would be 15; it wound up at 18. Why do they even bother to guess at this index. It is a waste of time.

October (2011) homebuilder sentiment highest since May 2010
NEW YORK | Tue Oct 18, 2011 10:04am EDT
(Reuters) - Homebuilder sentiment perked up in October to its highest level in a year and a half, though ongoing challenges still kept confidence historically low, the National Association of Home Builders said on Tuesday.

The NAHB/Wells Fargo Housing Market index rose to 18 from 14 the month before, the group said in a statement. It was the highest level since May 2010. Economists polled by Reuters had predicted the index would rise to 15.

Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.

"This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country, as extremely favorable interest rates and prices catch consumers' attention," NAHB chief economist David Crowe said in a statement.

Even so, builders are being squeezed by rising materials costs and low home prices due to the glut of foreclosed homes, Crowe said.

A gauge of single family home sales rose to 18 from 14, which was also the highest level since May 2010. The gauge of sales expectations in the next six months climbed to 24 from 17, the highest since March.

(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)


Home Builder Sentiment Posts Biggest Gain in Over (a) Year
Published: Tuesday, 18 Oct 2011 | 10:07 AM ET
By: Diana Olick
CNBC Real Estate Reporter

Despite sluggish summer sales, confidence among the nation's home builders is gaining strength, posting its largest gain since April 2010, when the now-expired home buyer tax credit brought more buyers into the market.

Confidence on the National Association of Home Builder's monthly sentiment index jumped 4 points to 18. Fifty, however, is still the line between positive and negative sentiment.

“Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.

“That said," he added, "confidence remains quite low as builders continue to confront overly restrictive lending policies that are discouraging prospective buyers, problems with new-home appraisals and widespread uncertainty regarding federal support for homeownership."

The biggest jump in confidence came in the component of the index gauging future sales expectations, which rose seven points. Buyer traffic and current sales improved, but not quite as dramatically.

The biggest surge came from builders out West, who posted their highest confidence since 2007. Builder sentiment in the Northeast was unchanged.

While this monthly survey has many builders moving from the "poor" to "fair" category, they haven't moved to "good" yet. Builders still cite competition from foreclosures, pressure on home prices, and high material costs as big barriers to real improvement in the home building market.