Building Confidence

Builder Confidence Edges Up Again
Builder confidence rose to a score of 19, the highest number in more than a year, this according to yesterday’s NAHB/Wells Fargo Housing Market Index press release. August’s report had been 18, and it should be noted that a “good” rating remains far off in the distance at 50 or more.

Analysts expected the slight rise in confidence, as demand has been up, even in the midst of the muting effect of foreclosure numbers. Within the report, the country is broken up into four regions, and all four regions saw improved ratings, the Midwest taking top honors.

There are basically three factors that have pushed the HMI in a positive direction. Reduced housing prices have allowed buyers who can afford to move up the ability to get more house for their money than in years past. Excellent mortgage rates throughout the year have kept demand high, as well. And finally, the $8,000 first-time homebuyer tax credit has brought new purchasers into the market.

Uvestor Opportunity:
The builders realize that one of their incentives (the $8,000 tax credit) is going away, at least temporarily. They also realize that the foreclosure crisis is modestly contained at best, and the threat for another wave to hit is very real. Interest rates also could move higher, as they have in recent days.

So… to build or not to build? That is the question.

Expectation is that the larger builders will unleash what they can into the market. It will be here and there and very opportunistic. With so much variance throughout the country, it really will be a neighborhood-by-neighborhood, block-by-block decision. To be sure, it will certainly help investors looking to flip some foreclosures if the market is not further cluttered unnecessary by expansion of inventory. It remains to be seen, though, how long the builders want to sit on the sidelines.


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