U.S. Homebuilder Confidence Rises in March to Highest Level in 10 Months

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Confidence among U.S. homebuilders increased in March to the highest level since May 2010 as more firms anticipated stronger sales in the next six months, a sign the housing market is stabilizing.

The National Association of Home Builders/Wells Fargo sentiment index rose to 17 this month from 16, data from the Washington-based group showed today. Measures of traffic of prospective buyers and current purchases were unchanged from January. Readings below 50 mean more respondents said conditions were poor.

“Prevailing indicators portend some improvement in the overall economy, which should generate modest housing market gains later this year,” David Crowe, chief economist at NAHB, said in a statement.

Demand for new homes remains tepid as limited job growth, mounting foreclosures and falling prices deter potential buyers. Builders also have to compete with a growing number of unsold properties that reduce home values after processing delays created a backlog of defaults in February.

The measure matched the median forecast of 17 in a Bloomberg News survey. Projections among the 49 economists surveyed ranged from 15 to 18.

The gauge, which was first published in January 1985, reached a record low of 8 in January 2009, and averaged 54 in the five years before the recession began in December 2007.

Sales Expectations

The builders group’s index of current single-family home sales held at 17, the report showed. A measure of sales expectations for the next six months increased to 27 from 25. The gauge of buyer traffic stayed at 12 last month.

“Builders are cautiously looking forward to the spring home buying season in hopes that improving economic conditions will help bring more buyers to the table,” NAHB Chairman Bob Nielsen, a homebuilder from Reno, Nevada, said in a statement.

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

Builders in two of the four regions saw an increase in confidence this month. The index rose to 17 from 13 in the West and increased to 20 from 18 in the South. The gauge held at 12 in the Midwest and declined to 20 from 21 in the Northeast.

With unemployment around 9 percent and foreclosures still a threat, homebuilders are cutting back on construction. There were 188,000 new houses on the market at the end of January, the fewest since December 1967, Commerce Department figures showed Feb. 24.

Foreclosure Filings

In February, lenders under legal scrutiny struggled to process a backlog of defaults and put new systems in place for home seizures, pulling U.S. foreclosure filings down to the lowest level in three years, according to RealtyTrac Inc.

Even with February’s decrease, foreclosure filings will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said Jan. 13.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, reported on March 1 a first-quarter loss after a drop in sales and the absence of a tax benefit that boosted results a year earlier.

“We need confidence to go up,” Chief Executive Officer Ara Hovnanian said March 2 during a call with analysts. “We need employment numbers to get better, and I think that’ll attract traffic as well as customers.”

Builders began work on fewer houses in February, according to the median estimate in a Bloomberg survey before figures tomorrow from the Commerce Department.

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