More Home Builders Are Confident about Recovery This Year

Confidence among home builders in the country rose in February this year, based on the growth of the Index of Builder Confidence of the National Association of Home Builders and Wells Fargo.

In February, the index climbed up to 17, higher than the previous index of 15 and higher than the prediction of analysts. It was also the highest point reached over the past three months.

The buyer traffic gauge stood at 12 and the measure of sales prospects surged to 27, up from the January reading of 26.

According to analysts, although figures below 50 mean that most home builders view the industry situation as poor, the increase in the index meant that builders are less gloomy about their prospects for recovery. One of the factors that have encouraged builders is the expansion and extension of the homebuyer tax credit program.

The general economic index of the Federal Reserve Bank of New York also climbed up to 24.9 in February from the January reading of 15.9. Readings above zero mean that New York and portions of Connecticut and New Jersey have significant growth prospects.

According to Michigan businessman and NAHB chairman Bob Jones, optimism is growing among home builders because of the still low mortgage rates, the improvement of the tax credit scheme and the apparent stabilization of home prices.

Of the four regions tracked by the index, confidence surged in two regions, rising to a record 19 in the South and to 13 in the Midwest. In both regions, the index rose by two points.

In contrast, confidence dropped to 19 in the Northeast and to 14 in the West. The index fell by one point in both regions.

David Crowe, the chief economist of NAHB, said that the tax credit expansion has been a positive factor for builders, but the continued foreclosures are still pushing down the level of builder expectations.

As predicted by a foreclosure tracking firm, about 3 million homes will be taken back by mortgage banks this year because of depressed property values and high unemployment rates. Last year, 2.82 million homes were put into the foreclosure process.

According to survey respondents, housing starts may have increased to an annual rate of 580,000 units in January from 557,000 units in December last year. If the scheduled release of the Commerce Department report affirms the projection, the 4.1-percent increase in housing starts shows that home builders have begun to act on their optimism.

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