Homebuilders’ pessimism eases a bit

Bob Wellinski/Michigan City News Dispatch via Associated Press
Builders are growing less pessimistic about the housing market, according to a survey, though the competition from foreclosure sales remains stiff.

WASHINGTON - Rising interest from would-be buyers is leaving homebuilders less pessimistic about the housing market. But tighter lending standards are still keeping many potential buyers from purchasing new homes.

The National Association of Home Builders/Wells Fargo builder sentiment index rose two points to 21 in December -the highest level since May 2010. It was just the second time the index has been at 20 or above in two years.

Still, any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006.


Last year, the number of people who bought new homes fell to the lowest level on records going back nearly a half-century. The figure for 2011 will be close to that level.

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Builders are struggling to compete with foreclosures, which have forced down prices of previously occupied homes. And many buyers are finding it hard to qualify for loans or make the higher down payments now required.

Those in a position to buy are benefiting from lower prices and mortgage rates. The average rate on the 30-year fixed mortgage is 3.94 percent, a record low. Yet so far, those factors have done little to boost home sales.

New homes make up a small portion of housing sales. But they have an outsize impact on the economy. The builders group says each new home built creates an average of three jobs for a year and generates about $90,000 in taxes.