Home Builders See Signs of Hope

Despite rising foreclosures and weak consumer confidence, the nation's home builders are seeing signs of hope in housing. Home builder confidence rose for the second straight month in November, according to the National Association of Home Builders' monthly sentiment survey, but builders warn it is still far below a positive reading.

“While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers,” said Bob Nielsen, NAHB Chairman and a home builder from Reno, Nev.

Confidence rose in three of the four geographic regions, with the Midwest seeing the biggest gains. Out West, where distressed properties are making up more than half of the housing market, confidence dropped significantly. Builders saw the biggest gains in current sales conditions, with future expectations and buyer traffic still up, but slightly less.

Builders credit extremely favorable mortgage rates and home prices for tempting more buyers into the market, but they also lobbied heavily for Congress to reinstate higher loan limits at mortgage giants Fannie Mae and Freddie Mac. Loan limits there fell from $729,750 to $625, 500 on October first. This week lawmakers instead made a deal to raise limits at the FHA, but not at Fannie Mae and Freddie Mac. The builders' association is still supporting the measure.

"To help mend the struggling housing market, stabilize home values, provide constancy while private investors re-enter the market and ensure that millions of creditworthy home borrowers can access the best possible mortgage rates, Congress must support this bill to help American families and get the lackluster economy moving forward," Nielsen wrote in a statement.

Several builder analysts have upgraded various public builders recently, expecting a turnaround in the sector sometime next year. Housing starts rose significantly in September, but that was largely on the back of the multi-family sector, responding to increased rental demand. Expectations for October starts are flat to lower. They will be released Thursday morning by the Commerce Department.