Upon a more optimistic outlook for sales, confidence is building among U.S. home builders. The National Association of Homebuilders (NAHB) reports that builder confidence in the market for newly built, single-family homes rose two points to 15 in July. Statistics show that the builders group’s index of sales expectations for the rest of 2011 increased from 15 to 22. This increase in confidence is attributed to buyers taking advantage of favorable buying conditions that are available. And sales expectations of course play a part, with the outlook being positive for the next six months.
Distressed Properties Backlog
Still, builders are facing many challenges such as a backlog of distressed properties that are still in foreclosure. You add to that rising unemployment and depressed home values and it would appear that housing may remain one of the weakest parts of the economic recovery. Notably, the index of buyer traffic held at 12. Sales for existing homes rose nearly 3 percent in June which is a good thing except for builders, they are gaining the market share from new homes because of increased demand for distressed properties at lower prices.
Stuck at the Bottom?
Still according to David Crowe, the NAHB Chief Economist, “the market continues to bounce along the bottom, with conditions in some locations beginning to improve.” NAHB Chairman and homebuilder, Bob Nielsen points out, “The improvement in builder confidence in July is a positive sign that the outlook perhaps isn’t quite as bleak as was feared in June. While builders continue to confront serious challenges with regard to competition from foreclosed properties that are priced below replacement cost, inaccurate appraisals of new homes, and a very restrictive lending environment for new home construction, select markets are showing gradual improvement as consumers begin to take advantage of very favorable buying conditions.”
The builder perception may not be too far off. If sales are increasing and buyers continue to have such great buying conditions, home builders may just see their market grow in the near future. It will be an interesting trend to watch as changes take place in the real estate market – with so many houses at such good prices, will buyers demand new builds and if so, how much? Stay tuned…
