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Homebuilder confidence at highest level since 2007

With the start of the new year, we have a pleasant surprise with the homebuilder market as homebuilder confidence levels are currently at their highest point since June of 2007, however the outlook is not so optimistic reported National Association of Homebuilders in their index report.

Wells Fargo and the National Association of Homebuilders surveyed builders this month to gauge expectations of the single-family home market for new homes over the next six months. The scale is based on a 100-point system, and January saw a rise of 4 points to 25 total in January from December. On average, a score of 50 signals a prospering market. Homebuilder confidence has been on the rise for the past four months in a row with the latest jump measured across each region.

"Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near-historic lows in the first half of 2011," reported Chief Economist of the NAHB David Crowe.

The biggest gain was seen in the Southern region, followed by the Midwest and Northeast regions. No region received an index score above 27 however.

Crowe also continued by saying many builders are still very cautious. They have concerns with tightened credit conditions, appraisals for projects returning below construction costs, and the ever-present continual flow of foreclosures.

In regards to sales, homebuilders have been the most optimistic in regards to the next six months since September 2009, also tracked by the NAHB survey.

"Policymakers must now take every precaution to avoid derailing this nascent recovery," Crowe said.

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