Home Builders Turn Optimistic

Lower Home Prices and Sales Incentives Increase Buyer Demand

With lower home prices luring more consumers into the market, the nation's home builders continued to grow more optimistic during January, extending an uptick begun in the closing quarter of last year.

The Housing Market Index of builder sentiment compiled by the National Association of Home Builders (NAHB) and Wells Fargo Bank rose two points to a reading of 35, improving on an upwardly revised reading of 33 in December.

"The same factors that were evident at the end of 2006 continue to hold true in today's housing market — improving affordability measures, strengthening consumer assessments of home buying conditions, and an upswing in applications for mortgages to buy homes," said David Seiders, NAHB chief economist.

"Builders are starting to see that the worst is behind them and that buying conditions have improved to the point where greater optimism is warranted."

Seiders said the recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-2006, lower energy prices, and growth in employment and household income. Lower home prices and widespread sales incentives offered by builders have also helped resuscitate buyer demand, he said.

Three of the nation's four regions recorded gains in confidence during January, with the Northeast, Midwest, and South each putting up a two-point increase. Confidence levels in the West were flat.

Home & Textiles Today Staff | News & Commentary

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