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Builder Confidence Hits Six-Month High

hard-hatHomebuilder confidence in the single-family housing market has finally climbed back above benchmark levels, an industry group reported Wednesday.

The National Association of Home Builders' [1] (NAHB) Housing Market Index [2] (HMI) registered a score of 53 in the group's July survey, increasing four points from June.

The index measures builder sentiment regarding current single-family home sales, expected sales in the next six months, and the level of traffic from prospective buyers. A reading above the 50 benchmark indicates more builders view sales conditions as good than poor.

"This is the first time that builder confidence has been above 50 since January and an important sign that it is strengthening as pent-up demand brings more buyers into the marketplace," said NAHB Chair Kevin Kelly.

After spending eight months above the neutral mark, the index plunged to 46 in February, holding steady for four months as builders and industry analysts waited for news of a return in positive momentum in housing.

That upswing finally came with the arrival of more encouraging labor reports, said NAHB Chief Economist David Crowe.

"An improving job market goes hand-in-hand with a rise in builder confidence," Crowe said. "As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home."

Whether or not that increase in confidence will translate to more active construction remains to be seen. The Census Bureau is scheduled to release Thursday its first estimate of homebuilding in June, with starts forecast to come in at an adjusted annual rate of 1.02 million, slightly more than in May.

All three index components improved in July. NAHB reported a four-point gain in the measure of current sales conditions, putting it at 57, while the gauge of future sales expectations rose six points to 64.

Builders also showed greater confidence regarding prospective buyer traffic, though that index remains on the negative side at 39.

At the regional level, builder sentiment in the Midwest crossed back up above 50 for the first time in months, rising six index points to 53. The South and West continued to float above the benchmark, with small gains bringing their indexes up to 53 and 59, respectively.

Despite a three-point improvement, the index for the Northeast still fell far short of the neutral line, coming in at 37.