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Homebuilder Confidence Soars to Five-Year High in July

Builder confidence jumped six points in July to its highest level since March 2007, the ""National Association of Home Builders"":http://www.nahb.com/ (NAHB) reported Tuesday. Economists had expected a modest one point increase in July.

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The six-point gain to 35 was the largest month-over-month gain since September 2002 when the confidence gauge rose eight points.

The Housing Market Index (HMI), considered a measure of builder confidence, could be reflected in permits and starts data reported for July.

That report from the Census Bureau, will be issued in August. Census will report Wednesday on permits and starts for June when builder confidence, as reported by NAHB, rose one point to 29.

The index was up 20 points from July 2011, the largest year-over-year gain since December 1992.

The increase in the index was driven by a sharp gain in the outlook for sales six months out which rose 11 points in July to 44, the highest level since April 2007.

The 11-point month-month increase in this component was the last largest since November 1988. The index is up 23 points since July 2011, the largest year-year bump since January 1992.

The current sales index rose six points to 37, its highest level since March 2007. The six-point gain was the largest month-over-month improvement since May 2003.

The current sales measure is up 22 points in the last year, the strongest year-over-year gain since December 1998.

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Buyer traffic as measured by the homebuilder survey also rose six points in July to 29, the highest level since February 2007.

The month-over-month increase was the strongest since November 2001 ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the last month of the recession that year. The index is up 16 points in the last year, the largest year-over-year increase since June 1996.

The NAHB was giddy over the improvement though the index remains below 50 for the 74th straight month ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the tipping point between good and bad housing markets.

""Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved,"" said NAHB chairman Barry Rutenberg.

""This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable,"" he added.

""Combined with the upward movement we've seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô though still in a fragile stage of recovery ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô is returning to its more traditional role of leading the economy out of recession,"" said NAHB Chief Economist David Crowe.

The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, gauges builder perceptions of current single-family home sales and sales expectations for the next six months as ""good,"" ""fair"" or ""poor.""

The survey also asks builders to rate traffic of prospective buyers as ""high to very high,"" ""average"" or ""low to very low.""

Regionally, the index improved in each of the four census regions: up 12 points to 44 in the West, eight points to 36 in the Northeast, five points to 32 in the South and three points to 34 in the Midwest. The index level in the West was its highest since June 2006.

The HMI survey followed a disappointing payroll report for June which showed the nation added 80,000 jobs, far what the market had been expecting. However recent housing specific survey such as the Case-Shiller Home Price Index show improvements in home prices.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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