Home builder confidence sees largest monthly increase in 10 years

Adding more weight to the argument that the housing market is officially in recovery mode, the National Association of Home Builders announced Tuesday that builder confidence in the housing market saw its largest one-month gain in nearly a decade.

Builder confidence rose six points to a rating of 35 on the NAHB’s Housing Market Index for July, bringing the index to its highest overall point since March 2007. Despite the jump, that confidence rating is still well behind a rating of 50 — what NAHB considers a “good” confidence rating.

“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 – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession,” NAHB Chief Economist David Crowe said in a statement. “This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery – namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved.”

These are definitely good signs. And if Bill McBride is correct, we should begin to see the number of construction jobs and ultimately construction’s economic recovery in general begin to rebound as a result of the housing recovery.

The rating is compiled from a monthly survey of 318 home builders that the NAHB has conducted for the past 25 years. The index gauges builder perceptions of current home sales and sales expectations for the next six months as “good,” “fair” or “poor” and asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

In addition to overall confidence, each contributing component of the survey recorded gains in July as well. Current sales conditions and traffic of perspective buyers each rose six points, to 37 and 29, respectively, while the sales expectations component for the next six months rose 11 points to 44.

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Each region of the country also posted index gains in July with the Northeast registering an eight-point gain to 36, the Midwest gaining three points to 34, the South gaining five points to 32 and the West gaining 12 points to 44.